-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RVtzo4hWmtybtcS1kqNWL+p8R9+rFXqVAsaDMWRr6N40A8E95SZ740862f4H+Vqx Ontvly8TddNw2G6FXpGn6g== 0000912057-00-008998.txt : 20000302 0000912057-00-008998.hdr.sgml : 20000302 ACCESSION NUMBER: 0000912057-00-008998 CONFORMED SUBMISSION TYPE: SC TO-T PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 20000229 GROUP MEMBERS: INTERNATIONAL PAPER CO /NEW/ GROUP MEMBERS: INTERNATIONAL PAPER-37, INC. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SHOREWOOD PACKAGING CORP CENTRAL INDEX KEY: 0000800266 STANDARD INDUSTRIAL CLASSIFICATION: CONVERTED PAPER & PAPERBOARD PRODS (NO CONTAINERS/BOXES) [2670] IRS NUMBER: 112742734 STATE OF INCORPORATION: DE FISCAL YEAR END: 0427 FILING VALUES: FORM TYPE: SC TO-T SEC ACT: SEC FILE NUMBER: 005-38074 FILM NUMBER: 557539 BUSINESS ADDRESS: STREET 1: 277 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10172 BUSINESS PHONE: 2123711500 MAIL ADDRESS: STREET 1: 277 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10172 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL PAPER CO /NEW/ CENTRAL INDEX KEY: 0000051434 STANDARD INDUSTRIAL CLASSIFICATION: PAPER MILLS [2621] IRS NUMBER: 130872805 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-T BUSINESS ADDRESS: STREET 1: TWO MANHATTANVILLE RD CITY: PURCHASE STATE: NY ZIP: 10577 BUSINESS PHONE: 9143971500 MAIL ADDRESS: STREET 1: TWO MANHATTANVILLE ROAD CITY: PURCHASE STATE: NY ZIP: 10577 FORMER COMPANY: FORMER CONFORMED NAME: INTERNATIONAL PAPER & POWER CORP DATE OF NAME CHANGE: 19710527 SC TO-T 1 SC TO-T - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------- SCHEDULE TO (Rule 14D-100) Tender Offer Statement Under Section 14(d)(1) or 13(e)(1) of the Securities Exchange Act of 1934 -------------------------- SHOREWOOD PACKAGING CORPORATION (Name of Subject Company (Issuer)) INTERNATIONAL PAPER-37, INC. INTERNATIONAL PAPER COMPANY (Names of Filing Persons (Offerors)) COMMON STOCK, $.01 PAR VALUE PER SHARE (INCLUDING ASSOCIATED RIGHTS) (Title of Class of Securities) 825229107 (CUSIP Number of Class of Securities) James W. Guedry, Esq. Vice President and Secretary International Paper Company Two Manhattanville Road Purchase, New York 10577 (914) 397-1500 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on behalf of Filing Persons) COPY TO: JEFFREY J. ROSEN, ESQ. O'MELVENY & MYERS LLP 153 EAST 53RD STREET NEW YORK, NEW YORK 10022-4611 (212) 326-2000 CALCULATION OF FILING FEE Transaction Valuation*: $655,939,977 Amount of Filing Fee: $131,188.00
* Estimated for purposes of calculating the amount of the filing fee only. This calculation assumes the purchase of all outstanding shares of common stock, par value $.01 per share of Shorewood Packaging Corporation, (the "Common Stock") including associated rights to purchase preferred stock (the "Rights" and together with the Common Stock, the "Shares"), at a price per Share of $21.00 in cash. As of February 15, 2000, there were (i) 27,375,771 Shares outstanding and (ii) 3,859,466 Shares reserved for issuance under stock incentive plans and outstanding options, warrants and other rights to acquire Shares from the Company. The amount of the filing fee, calculated in accordance with Rule 0-11 of the Securities Exchange Act of 1934, as amended, equals 1/50(th) of one percent of the value of the transaction. / / Check the box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount previously paid: Not applicable Filing Party: Not applicable Form or registration no.: Not applicable Date Filed: Not applicable
/ / Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. Check the appropriate boxes below to designate any transactions to which the statement relates: /X/ third-party tender offer subject to Rule 14d-1. / / issuer tender offer subject to Rule 13e-4. / / going-private transaction subject to Rule 13e-3. / / amendment to Schedule 13D under Rule 13d-2. Check the following box if the filing is a final amendment reporting the results of the tender offer: / / - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- This Tender Offer Statement on Schedule TO relates to the third-party tender offer by International Paper-37, Inc., a Delaware corporation ("Purchaser") and a wholly owned subsidiary of International Paper Company, a New York corporation ("Parent"), to purchase all of the issued and outstanding shares of common stock, par value $.01 per share (the "Common Stock"), of Shorewood Packaging Corporation, a Delaware corporation (the "Company") and the associated rights to purchase preferred stock (the "Rights" and, together with the Common Stock, the "Shares"), at a purchase price of $21.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase dated February 29, 2000 (the "Offer to Purchase"), a copy of which is attached hereto as Exhibit (a)(1)(A), and in the related Letter of Transmittal (the "Letter of Transmittal"), a copy of which is attached hereto as Exhibit (a)(1)(B) (which, together with the Offer to Purchase, as amended or supplemented from time to time, constitute the "Offer"). The information in the Offer to Purchase, including all schedules and annexes thereto, is hereby expressly incorporated herein by reference in response to all the items of this Schedule TO, except as otherwise set forth below. ITEM 1. SUMMARY TERM SHEET. The information set forth in the Summary Term Sheet in the Offer to Purchase is incorporated herein by reference. ITEM 2. SUBJECT COMPANY INFORMATION. (a) The name of the subject company is Shorewood Packaging Corporation, a Delaware corporation. The Company's executive offices are located at 277 Park Avenue, New York, New York 10172, telephone, (212) 371-1500. (b) The class of securities to which this statement relates is the Common Stock, par value $.01 per share, including the associated Rights, of the Company, of which 27,375,771 shares were issued and outstanding as of February 15, 2000. The information set forth on the cover page and in the "Introduction" of the Offer to Purchase is incorporated herein by reference. (c) The information set forth in Section 6 ("Price Range of Shares; Dividends") of the Offer to Purchase is incorporated herein by reference. ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON. (a) This Tender Offer Statement is filed by Parent and Purchaser. The information set forth in Section 8 ("Certain Information Concerning Parent and Purchaser") of the Offer to Purchase and on Schedule I thereto is incorporated herein by reference. (b) The information set forth in Section 8 ("Certain Information Concerning Parent and Purchaser") of the Offer to Purchase and on Schedule I thereto is incorporated herein by reference. (c) The information set forth in Section 8 ("Certain Information Concerning Parent and Purchaser") of the Offer to Purchase and on Schedule I thereto is incorporated herein by reference. During the last five years, none of Purchaser or Parent or, to the best knowledge of Purchaser or Parent, any of the persons listed on Schedule I to the Offer to Purchase (i) has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) was a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of such laws. All of the persons listed on Schedule I to the Offer to Purchase are citizens of the United States. ITEM 4. TERMS OF THE TRANSACTION. The information set forth in the Offer to Purchase is incorporated herein by reference. 2 ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS. (a) Parent is the principal supplier of solid bleached sulfate ("SBS") board to the Company. The Company purchased approximately 68,800 tons of SBS board from Parent during the calendar year ended December 31, 1999 for an aggregate price of approximately $62,700,000. Except as disclosed above in this Item 5(a), during the past two years, there have been no transactions that would be required to be disclosed under this Item 5(a) between any of Purchaser or Parent or, to the best knowledge of Purchaser and Parent, any of the persons listed on Schedule I to the Offer to Purchase, and the Company or any of its executive officers, directors or affiliates. (b) The information set forth in the Introduction, Section 10 ("Background of the Offer and the Merger; Past Contacts or Negotiations with the Company") and Section 11 ("The Merger Agreement; Stockholders Agreement; Employment Agreements") of the Offer to Purchase is incorporated herein by reference. Except as set forth in the Introduction, Section 10 and Section 11 of the Offer to Purchase, there have been no material contacts, negotiations or transactions during the past two years which would be required to be disclosed under this Item 5(b) between any of Purchaser or Parent or any of their respective subsidiaries or, to the best knowledge of Purchaser and Parent, any of those persons listed on Schedule I to the Offer to Purchase and the Company or its affiliates concerning a merger, consolidation or acquisition, a tender offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets. ITEM 6. PURPOSE OF THE TRANSACTION AND PLANS OR PROPOSALS. (a), (c)(1), (4)-(7) The information set forth in the Introduction, Section 10 ("Background of the Offer and the Merger; Past Contacts or Negotiations with the Company"), Section 11 ("The Merger Agreement; Stockholders Agreement; Employment Agreements"), Section 12 ("Purpose of the Offer and the Merger; Plans for the Company"), Section 13 ("Certain Effects of the Offer") and Section 14 ("Dividends and Distributions") of the Offer to Purchase is incorporated herein by reference. (c)(2)-(3) Not applicable. ITEM 7. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. The information set forth in Section 9 ("Source and Amount of Funds") of the Offer to Purchase is incorporated herein by reference. ITEM 8. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a) and (b) The information set forth in the Introduction and Section 8 ("Certain Information Concerning Parent and Purchaser") of the Offer to Purchase is incorporated herein by reference. ITEM 9. PERSONS/ASSETS RETAINED, EMPLOYED, COMPENSATED OR USED. The information set forth in the Introduction and Section 17 ("Fees and Expenses") of the Offer to Purchase is incorporated herein by reference. ITEM 10. FINANCIAL STATEMENTS. Not applicable. ITEM 11. ADDITIONAL INFORMATION. (a) The information set forth in Section 11 ("The Merger Agreement; Stockholders Agreement; Employment Agreements"), Section 13 ("Certain Effects of the Offer") and Section 16 ("Certain Legal Matters") of the Offer to Purchase is incorporated herein by reference. (b) The information set forth in the Offer to Purchase and Letter of Transmittal is incorporated herein by reference. 3 ITEM 12. EXHIBITS. (a)(1)(A) Offer to Purchase dated February 29, 2000. (a)(1)(B) Letter of Transmittal. (a)(1)(C) Notice of Guaranteed Delivery. (a)(1)(D) Letter from the Dealer Manager to Brokers, Dealers, Commercial Banks, Trust Companies and Nominees. (a)(1)(E) Letter to clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Nominees. (a)(1)(F) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(1)(G) Summary Advertisement as published on February 29, 2000. (a)(1)(H) Press Release dated February 17, 2000. (b) None. (d)(1) Agreement and Plan of Merger dated as of February 16, 2000, by and among International Paper Company, International Paper-37, Inc. and Shorewood Packaging Corporation. (d)(2) Stockholders Agreement dated as of February 16, 2000 by and among International Paper Company, International Paper-37, Inc. and the individuals and other parties listed on Schedule A attached thereto. (d)(3) Letter Agreement between Marc P. Shore and International Paper Company dated as of February 16, 2000 and Exhibit A Form of Employment Agreement. (d)(4) Letter Agreement between Howard M. Liebman and International Paper Company dated as of February 16, 2000 and Exhibit A Form of Employment Agreement. (g) None. (h) None.
ITEM 13. INFORMATION REQUIRED BY SCHEDULE 13E-3. Not applicable. 4 SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. INTERNATIONAL PAPER COMPANY By: /s/ JAMES W. GUEDRY ----------------------------------------- Name: James W. Guedry Title: Vice President and Secretary INTERNATIONAL PAPER-37, INC. By: /s/ JAMES W. GUEDRY ----------------------------------------- Name: James W. Guedry Title: President
Date: February 29, 2000 5 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION - ----------- ----------- (a)(1)(A) Offer to Purchase dated February 29, 2000. (a)(1)(B) Letter of Transmittal. (a)(1)(C) Notice of Guaranteed Delivery. (a)(1)(D) Letter from the Dealer Manager to Brokers, Dealers, Commercial Banks, Trust Companies and Nominees. (a)(1)(E) Letter to clients for use by Brokers, Dealers, Commercial Banks, Trust Companies and Nominees. (a)(1)(F) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(1)(G) Summary Advertisement as published on February 29, 2000. (a)(1)(H) Press Release dated February 17, 2000. (d)(1) Agreement and Plan of Merger dated as of February 16, 2000, by and among International Paper Company, International Paper-37, Inc. and Shorewood Packaging Corporation. (d)(2) Stockholders Agreement dated as of February 16, 2000 by and among International Paper Company, International Paper-37, Inc. and the individuals and other parties listed on Schedule A attached thereto. (d)(3) Letter Agreement between Marc P. Shore and International Paper Company dated as of February 16, 2000 and Exhibit A Form of Employment Agreement. (d)(4) Letter Agreement between Howard M. Liebman and International Paper Company dated as of February 16, 2000 and Exhibit A Form of Employment Agreement.
EX-99.(A)(1)(A) 2 OFFER TO PURCHASE Offer to Purchase for Cash All Outstanding Shares of Common Stock (Including the Associated Rights to Purchase Preferred Stock) of SHOREWOOD PACKAGING CORPORATION at $21.00 Net Per Share by INTERNATIONAL PAPER-37, INC. a wholly owned subsidiary of INTERNATIONAL PAPER COMPANY THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, MARCH 27, 2000, UNLESS THE OFFER IS EXTENDED. THE OFFER (AS HEREINAFTER DEFINED) IS BEING MADE IN CONNECTION WITH THE AGREEMENT AND PLAN OF MERGER, DATED AS OF FEBRUARY 16, 2000 (THE "MERGER AGREEMENT"), BY AND AMONG SHOREWOOD PACKAGING CORPORATION (THE "COMPANY"), INTERNATIONAL PAPER COMPANY ("PARENT") AND INTERNATIONAL PAPER-37, INC. ("PURCHASER"). THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY (I) DETERMINED THAT THE OFFER, THE MERGER (AS HEREINAFTER DEFINED) AND THE MERGER AGREEMENT ARE ADVISABLE, FAIR TO, AND IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS, (II) APPROVED THE MERGER, THE OFFER, THE MERGER AGREEMENT AND THE OTHER TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT AND (III) RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES (AS HEREINAFTER DEFINED) PURSUANT THERETO AND APPROVE AND ADOPT THE MERGER AGREEMENT. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION DATE OF THE OFFER A NUMBER OF SHARES OF COMMON STOCK OF THE COMPANY, INCLUDING THE ASSOCIATED RIGHTS (THE "RIGHTS") TO PURCHASE PREFERRED STOCK (COLLECTIVELY, THE "SHARES"), WHICH REPRESENTS NOT LESS THAN FIFTY-ONE PERCENT OF THE TOTAL ISSUED AND OUTSTANDING SHARES ON A FULLY DILUTED BASIS (EXCLUDING ANY SHARES HELD BY THE COMPANY OR ANY OF ITS SUBSIDIARIES) AND (II) THE EXPIRATION OR TERMINATION OF ANY AND ALL WAITING PERIODS APPLICABLE TO THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, THE COMPETITION ACT (CANADA), THE INVESTMENT CANADA ACT AND ANY SIMILAR LEGAL REGIME IN ANY OTHER COUNTRY APPLICABLE TO SIGNIFICANT OPERATIONS OF PARENT OR ANY OF ITS SUBSIDIARIES OR THE COMPANY OR ANY OF ITS SUBSIDIARIES. THE OFFER IS ALSO SUBJECT TO OTHER CONDITIONS. SEE SECTION 15. THE OFFER IS NOT CONDITIONED UPON PARENT OR PURCHASER OBTAINING FINANCING. CERTAIN STOCKHOLDERS OF THE COMPANY WHO IN THE AGGREGATE OWN APPROXIMATELY 17% OF THE SHARES OUTSTANDING (APPROXIMATELY 15% ON A FULLY DILUTED BASIS) HAVE AGREED, AMONG OTHER THINGS, TO TENDER PURSUANT TO THE OFFER, AND NOT TO WITHDRAW, THEIR SHARES. The Dealer Manager for the Offer is: [LOGO] February 29, 2000 IMPORTANT Any stockholder desiring to tender all or any portion of such stockholder's Shares should either (1) complete and sign the Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal, mail or deliver it and any other required documents to the Depositary indicated thereon and either deliver the certificate(s) for such tendered Shares to the Depositary along with the Letter of Transmittal or tender such Shares pursuant to the procedures for book-entry transfer set forth in Section 2 of this Offer to Purchase, or (2) request such stockholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for the stockholder. Stockholders having Shares registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if they desire to tender such Shares. Unless the context requires otherwise, all references to Shares herein shall include the associated Rights. The Rights are presently evidenced by the certificates for the Common Stock and a tender by a stockholder of such stockholder's shares of Common Stock will also constitute a tender of the associated Rights. A stockholder who desires to tender Shares and whose certificate(s) for Shares is not immediately available, or who cannot comply with the procedures for book-entry transfer on a timely basis, may tender such Shares by following the procedures for guaranteed delivery set forth in Section 2 of this Offer to Purchase. Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Requests for additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may also be directed to the Information Agent or the Dealer Manager. Purchaser will not pay any fee or commission to any broker or dealer or to any other person (other than to the Dealer Manager, the Depositary and the Information Agent) in connection with the solicitation of tenders of Shares pursuant to the Offer. SUMMARY TERM SHEET.......................................... 1 INTRODUCTION................................................ 5 THE TENDER OFFER............................................ 7 1. Terms of the Offer....................................... 7 2. Procedure for Accepting the Offer and Tendering Shares... 9 3. Withdrawal Rights........................................ 11 4. Acceptance for Payment and Payment for Shares............ 12 5. Certain United States Federal Income Tax Consequences.... 13 6. Price Range of Shares; Dividends......................... 13 7. Certain Information Concerning the Company............... 14 8. Certain Information Concerning Parent and Purchaser...... 16 9. Source and Amount of Funds............................... 17 10. Background of the Offer and the Merger; Past Contacts or Negotiations with the Company............................. 17 11. The Merger Agreement; Stockholders Agreement; Employment Agreements................................................ 20 12. Purpose of the Offer and the Merger; Plans for the Company................................................... 33 13. Certain Effects of the Offer............................ 34 14. Dividends and Distributions............................. 35 15. Certain Conditions of the Offer......................... 35 16. Certain Legal Matters................................... 37 17. Fees and Expenses....................................... 40 18. Miscellaneous........................................... 40 Schedule I INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND PURCHASER....... I-1
SUMMARY TERM SHEET International Paper-37, Inc. is offering to purchase all of the outstanding shares of common stock of Shorewood Packaging Corporation and the rights to purchase preferred stock associated with the shares for $21.00 per share in cash. The following are some of the questions that you, as a stockholder of Shorewood Packaging Corporation, may have and the answers to those questions. We urge you to read carefully the remainder of this offer to purchase and the letter of transmittal because the information in this summary term sheet is not complete. Additional important information is contained in the remainder of this offer to purchase and the letter of transmittal. WHO IS OFFERING TO BUY MY SECURITIES? Our name is International Paper-37, Inc. We are a Delaware corporation and have carried on no business other than in connection with the merger agreement. We are a wholly owned subsidiary of International Paper Company, a New York corporation. See the "Introduction" and Section 8. WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER? We are offering to purchase all of the outstanding common stock of Shorewood Packaging Corporation and the rights to purchase preferred stock associated with such shares. See the "Introduction" and Section 1. HOW MUCH ARE YOU OFFERING TO PAY, WHAT IS THE FORM OF PAYMENT AND WILL I HAVE TO PAY ANY FEES OR COMMISSIONS? We are offering to pay $21.00 per share, net to you, in cash. If you are the record owner of your shares and you tender your shares to us in the offer, you will not have to pay brokerage fees or similar expenses. If you own your shares through a broker or other nominee, and your broker tenders your shares on your behalf, your broker or nominee may charge you a fee for doing so. You should consult your broker or nominee to determine whether any charges will apply. See the "Introduction." DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT? International Paper Company, our parent company, will provide us with sufficient funds from its own resources to purchase all shares validly tendered and not withdrawn in the offer and to provide funding for the merger which is expected to follow the successful completion of the offer. We anticipate that all of these funds will be obtained from the existing resources and internally generated funds of International Paper Company including short-term borrowings in the ordinary course of its business. The offer is not conditioned upon any financing arrangements. See Section 9. IS YOUR FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER IN THE OFFER? We do not think our financial condition is relevant to your decision whether to tender in the offer because the form of payment consists solely of cash and we have already arranged for all of our funding to come from the existing resources and internally generated funds of International Paper Company including short-term borrowings in the ordinary course of its business. Additionally, the offer is not subject to any financing condition. See Section 9. HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER? You will have at least until 12:00 midnight, New York City time, on Monday, March 27, 2000 to tender your shares in the offer. Further, if you cannot deliver everything that is required in order to make a valid tender by that time, you may be able to use a guaranteed delivery procedure, which is described later in this offer to purchase. See Section 1 and Section 2. 1 CAN THE OFFER BE EXTENDED AND UNDER WHAT CIRCUMSTANCES? Subject to the terms of the merger agreement, we can extend the offer. We have agreed in the merger agreement that we may extend the offer without Shorewood Packaging Corporation's consent in the following circumstances: - If any of the conditions to the offer, other than the condition that not less than 51% of the outstanding shares of Shorewood Packaging Corporation on a fully diluted basis (excluding shares held by Shorewood Packaging Corporation or any of its subsidiaries) be validly tendered and not properly withdrawn, have not been satisfied or waived, we can extend the offer until such time as they are satisfied or waived; - We may extend the offer for any period required by any rule, regulation, interpretation or position of the SEC or its staff or as required by applicable law; - If all conditions to the offer, other than the condition that not less than 51% of the outstanding shares of Shorewood Packaging Corporation on a fully diluted basis (excluding shares held by Shorewood Packaging Corporation or any of its subsidiaries) be validly tendered and not properly withdrawn, have been satisfied or waived, we may extend the offer for up to 30 business days (for all such extensions); or - If all conditions to the offer have been satisfied or waived but less than 90% of the outstanding shares of Shorewood Packaging Corporation on a fully diluted basis have been validly tendered and not properly withdrawn, we may extend the offer for up to 20 business days (for all such extensions) but only if we pay for all shares that have been validly tendered and not properly withdrawn at the time of such extension. As permitted by the merger agreement, we intend to extend the offer for one or more periods if all conditions to the offer have been satisfied or waived but less than 90% of the outstanding shares of Shorewood Packaging Corporation on a fully diluted basis have been validly tendered and not properly withdrawn. Such an extension pursuant to the merger agreement shall constitute a "subsequent offering period," which is an additional period of time, beginning after we have purchased shares tendered in the offer, during which stockholders may tender, but not withdraw, their shares and receive the offer consideration. In addition, we have agreed to extend the offer, if requested by Shorewood Packaging Corporation, in the following circumstances: - If at the expiration date of the offer any condition to the offer, other than (or in addition to) the condition that not less than 51% of the outstanding shares of Shorewood Packaging Corporation on a fully diluted basis (excluding shares held by Shorewood Packaging Corporation or any of its subsidiaries) be validly tendered and not properly withdrawn, has not been waived or satisfied, we have agreed to extend the offer until the earlier of June 30, 2000 or the date upon which such unsatisfied condition shall not be reasonably capable of being satisfied; and - If at the expiration date of the offer all conditions to the offer, other than the condition that not less than 51% of the outstanding shares of Shorewood Packaging Corporation on a fully diluted basis (excluding shares held by Shorewood Packaging Corporation or any of its subsidiaries) be validly tendered and not properly withdrawn, have been waived or satisfied we have agreed to extend the offer until the earlier of 10 business days after such expiration date or June 30, 2000. HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED? If we extend the offer, we will inform ChaseMellon Shareholder Services, L.L.C. (which is the depositary for the offer) of that fact and will make a public announcement of the extension, not later than 9:00 a.m., New York City time, on the next business day after the day on which the offer was scheduled to expire. See Section 1. 2 WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER? - We are not obligated to purchase any shares which are validly tendered unless the number of shares validly tendered and not properly withdrawn before the expiration date of the offer represents not less than 51% of the outstanding shares of Shorewood Packaging Corporation on a fully diluted basis (excluding shares held by Shorewood Packaging Corporation or any of its subsidiaries). - We are not obligated to purchase shares which are validly tendered if there is a material adverse change in Shorewood Packaging Corporation or its business or if the applicable waiting period under the Hart-Scott- Rodino Antitrust Improvements Act of 1976, the Competition Act (Canada), the Investment Canada Act or any similar legal regime in any other country applicable to significant operations of International Paper Company or any of its subsidiaries or Shorewood Packaging Corporation or any of its subsidiaries has not expired or been waived before we accept the shares which have been validly tendered. The offer is also subject to a number of other conditions. We can waive any of the conditions to the offer without Shorewood Packaging Corporation's consent other than the condition that not less than 51% of the outstanding shares of Shorewood Packaging Corporation on a fully diluted basis (excluding shares held by Shorewood Packaging Corporation or any of its subsidiaries) be validly tendered and not properly withdrawn. See Section 15. HOW DO I TENDER MY SHARES? To tender shares, you must deliver the certificates representing your shares, together with a completed letter of transmittal, to ChaseMellon Shareholder Services, L.L.C., the depositary for the offer, not later than the time the tender offer expires. If your shares are held in street name, the shares can be tendered by your nominee through The Depository Trust Company. If you cannot get any document or instrument that is required to be delivered to the depositary by the expiration of the tender offer, you may get a little extra time to do so by having a broker, a bank or other fiduciary which is a member of the Securities Transfer Agents Medallion Program or other eligible institution guarantee that the missing items will be received by the depositary within three New York Stock Exchange trading days. For the tender to be valid, however, the depositary must receive the missing items within that three trading day period. See Section 2. UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED SHARES? You can withdraw shares at any time until the offer has expired and, if we have not agreed by April 28, 2000 (or such later date as may apply if the offer is extended) to accept your shares for payment, you can withdraw them at any time after such time until we accept shares for payment. This right to withdraw will not apply to any subsequent offering period discussed in Section 1. See Section 3. HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES? To withdraw shares, you must deliver a written notice of withdrawal, or a facsimile of one, with the required information to the depositary while you still have the right to withdraw the shares. See Section 3. WHAT DOES SHOREWOOD PACKAGING CORPORATION'S BOARD OF DIRECTORS THINK OF THE OFFER? We are making the offer pursuant to the merger agreement, which has been unanimously approved by the board of directors of Shorewood Packaging Corporation. The board of directors of Shorewood Packaging Corporation unanimously (1) determined that the offer, the merger and the merger agreement are advisable, fair to, and in the best interests of, its stockholders, (2) approved the merger, the offer, the merger agreement and the other transactions contemplated by the merger agreement and (3) recommends that its stockholders accept the offer and tender their shares pursuant thereto and approve and adopt the merger agreement. See the "Introduction." 3 HAVE ANY STOCKHOLDERS AGREED TO TENDER THEIR SHARES? Yes. Stockholders who own shares representing approximately 17% of the outstanding common stock of Shorewood Packaging Corporation (approximately 15% after taking into consideration unexercised options and warrants and other securities convertible into common stock) have agreed to tender their shares in the offer. IF A MAJORITY OF THE SHARES ARE TENDERED AND ACCEPTED FOR PAYMENT, WILL SHOREWOOD PACKAGING CORPORATION CONTINUE AS A PUBLIC COMPANY? No. Following the purchase of shares in the offer we expect to consummate the merger, and following the merger, Shorewood Packaging Corporation no longer will be publicly owned. Even if for some reason the merger does not take place, if we purchase all the tendered shares, there may be so few remaining stockholders and publicly held shares that Shorewood Packaging Corporation common stock will no longer be eligible to be traded on the New York Stock Exchange or on any other securities exchange, there may not be a public trading market for Shorewood Packaging Corporation stock, and Shorewood Packaging Corporation may cease making filings with the SEC or otherwise cease being required to comply with SEC rules relating to publicly held companies. See Section 13. WILL THE TENDER OFFER BE FOLLOWED BY A MERGER IF ALL THE SHOREWOOD PACKAGING CORPORATION SHARES ARE NOT TENDERED IN THE OFFER? Yes. If we accept for payment and pay for at least 51% of the outstanding shares of Shorewood Packaging Corporation, we will be merged with and into Shorewood Packaging Corporation. If that merger takes place, International Paper Company will own all of the shares of Shorewood Packaging Corporation and all remaining stockholders of Shorewood Packaging Corporation (other than us and stockholders properly exercising dissenters' rights) will receive $21.00 per share in cash. See the "Introduction" and Section 11. IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES? If the merger described above takes place, stockholders not tendering in the offer will receive the same amount of cash per share that they would have received had they tendered their shares in the offer, subject to any rights of appraisal properly exercised under Delaware law. Therefore, if the merger takes place, the only difference to you between tendering your shares and not tendering your shares is that you will be paid earlier and will not have appraisal rights if you tender your shares. However, if for some reason the merger does not take place, the number of stockholders of Shorewood Packaging Corporation and the number of shares of Shorewood Packaging Corporation which are still in the hands of the public may be so small that there no longer will be an active public trading market (or, possibly, there may not be any public trading market) for Shorewood Packaging Corporation common stock. Also, as described above, Shorewood Packaging Corporation may cease making filings with the SEC or otherwise being required to comply with the SEC rules relating to publicly held companies. See the "Introduction" and Section 13. WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE? On February 16, 2000, the last trading day before we announced the tender offer and the possible subsequent merger, the closing price of Shorewood Packaging Corporation common stock reported on the New York Stock Exchange was $18.875 per share. On February 28, 2000, the last trading day before we commenced the tender offer, the closing price of Shorewood Packaging Corporation common stock reported on the New York Stock Exchange was $20.8125 per share. We advise you to obtain a recent quotation for shares of Shorewood Packaging Corporation common stock in deciding whether to tender your shares. See Section 6. WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE TENDER OFFER? You can call Georgeson Shareholder Communications Inc. at (800) 223-2064 (toll free) or Credit Suisse First Boston Corporation at (800) 881-8320 (toll free). Georgeson Shareholder Communications Inc. is acting as the information agent and Credit Suisse First Boston Corporation is acting as the dealer manager for our tender offer. See the back cover of this offer to purchase. 4 To the Holders of Common Stock of Shorewood Packaging Corporation: INTRODUCTION International Paper-37, Inc. ("Purchaser"), a Delaware corporation and a wholly owned subsidiary of International Paper Company, a New York corporation ("Parent"), hereby offers to purchase all outstanding shares of common stock, par value $.01 per share (the "Common Stock"), of Shorewood Packaging Corporation, a Delaware corporation (the "Company"), together with the associated rights to purchase preferred stock issued pursuant to the Rights Agreement, dated as of June 12, 1995 (the "Rights Agreement"), between the Company and The Bank of New York, as Rights Agent (the "Rights" and, together with the Common Stock, the "Shares"), at a price of $21.00 per Share (the "Offer Price"), net to the selling stockholder in cash, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements hereto or thereto, collectively constitute the "Offer"). Stockholders of record who hold Shares registered in their own name and tender their Shares directly to the Depositary (as defined below) will not be obligated to pay brokerage fees, commissions, solicitation fees or, subject to Instruction 6 of the Letter of Transmittal, stock transfer taxes, if any, on the purchase of Shares by Purchaser pursuant to the Offer. Stockholders who hold their Shares through a bank or broker should check with such institution as to whether they will be charged any service fees. However, any tendering stockholder or other payee who fails to complete and sign the Substitute Form W-9 that is included in the Letter of Transmittal may be subject to a required federal backup withholding tax of 31% of the gross proceeds payable to such stockholder or other payee pursuant to the Offer. See Section 2. Purchaser will pay all charges and expenses of Credit Suisse First Boston Corporation, as Dealer Manager ("Credit Suisse First Boston" or the "Dealer Manager"), Georgeson Shareholder Communications Inc., as Information Agent (the "Information Agent"), and ChaseMellon Shareholder Services, L.L.C., as Depositary (the "Depositary"), incurred in connection with the Offer. See Section 17. The Offer is conditioned upon, among other things, (i) there being validly tendered and not properly withdrawn prior to the expiration date of the Offer that number of Shares which represents not less than fifty-one percent of the total issued and outstanding Shares on a fully diluted basis (excluding any Shares held by the Company or any of its subsidiaries) (the "Minimum Condition") and (ii) the expiration or termination of any and all waiting periods applicable to the transactions contemplated by the Merger Agreement under the Hart-Scott- Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the Competition Act (Canada) (the "Competition Act"), the Investment Canada Act and any similar legal regime in any other country applicable to significant operations of Parent or any of its subsidiaries or the Company or any of its subsidiaries. The Offer is also subject to other terms and conditions. See Section 15. For purposes of the Offer, "on a fully diluted basis" means, as of any time, on a basis that includes the number of Shares that are actually issued and outstanding plus the maximum number of Shares that the Company may be required to issue pursuant to obligations under stock options, warrants and other rights or securities convertible into shares of Common Stock, whether or not currently exercisable. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of February 16, 2000 (the "Merger Agreement"), by and among Parent, Purchaser and the Company. The Merger Agreement provides, among other things, that, upon the terms and subject to the conditions therein, as soon as practicable after the consummation of the Offer, Purchaser will be merged with and into the Company (the "Merger"), with the Company being the corporation surviving the Merger (the "Surviving Corporation"). At the effective time of the Merger (the "Effective Time"), each outstanding Share (other than Shares held in the Company's treasury immediately before the Effective Time, and each Share held by Parent, Purchaser, any other subsidiary of Parent or any subsidiary of the Company immediately before the Effective Time, all of which will be cancelled, and other than Shares ("Dissenting Shares") with respect to which appraisal rights are properly exercised under the Delaware General Corporation Law (the "DGCL")) will be converted into and represent the right to receive the Offer Price, subject to any applicable withholding taxes, without interest. See Section 11. 5 The Board of Directors of the Company (the "Board") unanimously (i) determined that the Offer, the Merger and the Merger Agreement are advisable, fair to and in the best interests of, the Company's stockholders, (ii) approved the Merger, the Offer, the Merger Agreement and the other transactions contemplated by the Merger Agreement and (iii) recommends that the Company's stockholders accept the Offer, and tender their Shares pursuant thereto and approve and adopt the Merger Agreement. A special committee of the Board (the "Special Committee") and the Board have received the written opinion of Greenhill & Co., LLC ("Greenhill"), and the Board has received the written opinion of Bear, Stearns & Co. Inc. ("Bear Stearns"), in each case stating that the proposed consideration to be received by the holders of shares of Common Stock pursuant to the Offer and the Merger is fair to such holders from a financial point of view. A copy of the written opinions of Greenhill and Bear Stearns, which set forth the assumptions made, procedures followed, matters considered and limitations on the reviews undertaken, are included as annexes to the Company's Solicitation/Recommendation Statement on Schedule 14D-9 filed with the Securities and Exchange Commission (the "SEC") in connection with the Offer, a copy of which is being furnished to stockholders concurrently herewith. Stockholders are urged to read the full text of such opinions carefully. The Company has represented to Parent that as of February 15, 2000, there were 27,375,771 Shares outstanding and there were options and warrants to acquire 3,859,466 Shares outstanding. Neither Parent, Purchaser nor any person listed on Schedule I hereto beneficially owns any Shares. Accordingly, the Minimum Condition will be satisfied if 15,929,971 Shares are tendered in the Offer. Holders of 4,652,145 Shares have agreed to tender their Shares in the Offer pursuant to the Stockholders Agreement. See Section 11. The Merger Agreement provides that, promptly following the purchase of and payment for a number of Shares that satisfies the Minimum Condition, and from time to time thereafter, Purchaser shall be entitled to designate the number of directors, rounded up to the next whole number, on the Board that equals the product of (i) the total number of directors on the Board (giving effect to any additional directors elected by Purchaser) and (ii) the percentage that the number of Shares beneficially owned by Parent and Purchaser following the Offer bears to the total number of outstanding Shares, and the Company will take all action within its power to cause Purchaser's designees to be elected or appointed to the Board, including, without limitation, increasing the number of directors, and seeking and accepting resignations of incumbent directors; PROVIDED, HOWEVER, that before the Effective Time, the Board will have at least two directors who are directors on February 16, 2000 and who are not officers of the Company. In addition, at such time, the Company will also use its best efforts to cause individual directors designated by Purchaser to constitute the number of members, rounded up to the next whole number, on (i) each committee of the Board other than any such committee of the Board established to take action under the Merger Agreement and (ii) each board of directors of each subsidiary of the Company, and each committee thereof, that represents the same percentage as such individuals represent on the Board. See Section 11. The designation of directors by Parent is subject to compliance with the requirements of Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). In connection with the Offer and the Merger, the Board has approved an amendment to the Company's Rights Agreement to assure that the Rights are not exercisable as a result of the Offer or the Merger. The information contained herein concerning or attributed to the Company has been supplied by the Company, and all other information contained herein has been supplied by Parent and Purchaser. Although neither the Company nor Parent or Purchaser have any knowledge that would indicate that any statements contained herein based on the information provided by the other are untrue, neither the Company nor Parent or Purchaser take any responsibility for the accuracy or completeness of any information provided by the other or for any failure by the other to disclose events that may have occurred and may affect the significance or accuracy of such information but which are unknown to the Company or Parent and Purchaser, respectively. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION AND YOU SHOULD READ THEM IN THEIR ENTIRETY BEFORE MAKING ANY DECISION WITH RESPECT TO THE OFFER. 6 THE TENDER OFFER 1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will accept for payment and pay for all Shares which are validly tendered and not properly withdrawn on or prior to the Expiration Date, as soon as practicable after the Expiration Date. The term "Expiration Date" means 12:00 midnight, New York City time, on Monday, March 27, 2000, unless and until Purchaser (subject to the terms and conditions of the Merger Agreement) shall have extended the period of time for which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Purchaser, shall expire prior to the purchase of any Shares by Purchaser. The Offer is conditioned upon the satisfaction of the Minimum Condition and the other conditions set forth in Section 15 (collectively, the "Offer Conditions"). Subject to the provisions of the Merger Agreement, Purchaser may waive any or all of the conditions to its obligation to purchase Shares pursuant to the Offer other than the Minimum Condition. If by the initial Expiration Date or any subsequent Expiration Date any or all of the conditions to the Offer have not been satisfied or waived, subject to the provisions of the Merger Agreement, Purchaser may elect to (i) terminate the Offer and return all tendered Shares to tendering stockholders, (ii) waive all of the unsatisfied conditions and, subject to any required extension, purchase all Shares validly tendered by the Expiration Date and not properly withdrawn or (iii) extend the Offer and, subject to the right of stockholders to withdraw Shares until the new Expiration Date, retain the Shares that have been tendered until the expiration of the Offer as extended. Under the terms of the Merger Agreement, neither Parent nor Purchaser may, without the prior written consent of the Company, (i) decrease the Offer Price or change the form of consideration payable in the Offer, (ii) decrease the number of Shares subject to the Offer, (iii) impose conditions to the Offer in addition to the Offer Conditions, (iv) except as provided in the Merger Agreement or as required by any rule, regulation, interpretation or position of the SEC, change the Expiration Date or (v) otherwise amend any term of the Offer in a manner adverse to the holders of Shares. In addition, Purchaser may not, without the prior written consent of the Company, waive or amend the Minimum Condition. Notwithstanding the foregoing, Purchaser may, without the consent of the Company, extend the Offer beyond the initial Expiration Date in the following events: (i) from time to time if, at the initial Expiration Date (or any subsequent Expiration Date), any of the Offer Conditions (other than the Minimum Condition) shall not have been satisfied or waived, until such conditions are satisfied or waived; (ii) for any period required by any rule, regulation, interpretation or position of the SEC or the staff thereof applicable to the Offer or any period required by applicable law; (iii) if all the Offer Conditions (other than the Minimum Condition) are satisfied or waived, but the Minimum Condition has not been satisfied, for one or more periods not to exceed thirty (30) business days (for all such extensions); or (iv) if all of the Offer Conditions are satisfied or waived but the number of Shares validly tendered and not withdrawn is less than 90% of the number of then-outstanding Shares on a fully diluted basis, for an aggregate period not to exceed twenty (20) business days (for all such extensions), PROVIDED that, in the case of an extension pursuant to clause (iv), Purchaser must accept and promptly pay for all securities tendered prior to the date of such extension and otherwise meet the requirements of Rule 14d-11 under the Exchange Act in connection with each such extension. Such an extension pursuant to clause (iv) will constitute a Subsequent Offering Period (as defined below). Pursuant to Rule 14d-11 under the Exchange Act, Purchaser may, subject to certain conditions, provide a subsequent offering period following the expiration of the Offer on the Expiration Date (a "Subsequent Offering Period"). A Subsequent Offering Period is an additional period of time from three (3) business days to twenty (20) business days in length, beginning after Purchaser purchases Shares tendered in the Offer, during which stockholders may tender, but not withdraw, their Shares and receive the Offer Price. Purchaser intends to include a Subsequent Offering Period in the event that all the Offer Conditions have been satisfied or waived but less than 90% of the outstanding Shares on a fully diluted basis have been validly tendered 7 and not properly withdrawn as of the Expiration Date. Pursuant to Rule 14d-7 under the Exchange Act, no withdrawal rights apply to Shares tendered during a Subsequent Offering Period and no withdrawal rights apply during the Subsequent Offering Period with respect to Shares tendered in the Offer and accepted for payment. During a Subsequent Offering Period, Purchaser will promptly purchase and pay for any Shares tendered at the same price paid in the Offer. Parent and Purchaser have also agreed that Purchaser shall from time to time extend the Offer, if requested by the Company, (i) if at the initial Expiration Date (or any subsequent Expiration Date), any of the Offer Conditions other than (or in addition to) the Minimum Condition shall not have been waived or satisfied, until (taking into account all such extensions) the earlier of June 30, 2000 or such earlier date upon which any such condition (other than the Minimum Condition) shall not be reasonably capable of being satisfied prior to June 30, 2000; or (ii) if at the initial Expiration Date (or any subsequent Expiration Date), all of the Offer Conditions other than the Minimum Condition shall have been waived or satisfied and the Minimum Condition shall not have been satisfied, until the earlier of ten (10) business days after such Expiration Date or June 30, 2000. Subject to the applicable rules and regulations of the SEC and the provisions of the Merger Agreement, Purchaser also expressly reserves the right, in its sole discretion, at any time or from time to time, (i) to terminate the Offer if any of the Offer Conditions have not been satisfied and (ii) to waive any Offer Condition (other than the Minimum Condition) or otherwise amend the Offer in any respect, in each case by giving oral or written notice of such extension, termination, waiver or amendment to the Depositary and by making a public announcement thereof. If Purchaser accepts for payment any Shares pursuant to the Offer, it will accept for payment all Shares validly tendered prior to the Expiration Date and not properly withdrawn, and will promptly pay for all Shares so accepted for payment. The rights reserved by Purchaser in the preceding paragraph are in addition to Purchaser's rights pursuant to Section 15. Any extension, delay, termination or amendment of the Offer will be followed as promptly as practicable by public announcement thereof, such announcement in the case of an extension to be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date, in accordance with the public announcement requirements of Rule 14e-1(d) under the Exchange Act. Subject to applicable law (including Rules 14d-4(d) and 14d-6(c) under the Exchange Act, which require that any material change in the information published, sent or given to stockholders in connection with the Offer be promptly disseminated to stockholders in a manner reasonably designed to inform stockholders of such change), and without limiting the manner in which Purchaser may choose to make any public announcement, Purchaser shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by making a release to the Dow Jones News Service. If Purchaser makes a material change in the terms of the Offer or the information concerning the Offer, or if it waives a material condition of the Offer, Purchaser will disseminate additional tender offer materials (including by public announcement as set forth above) and extend the Offer to the extent required by Rules 14d-4(d) and 14e-1 under the Exchange Act. The minimum period during which an offer must remain open following material changes in the terms of the Offer, other than a change in price, percentage of securities sought or inclusion of or change to a dealer's soliciting fee, will depend upon the facts and circumstances, including the materiality, of the changes. In the SEC's view, an offer should remain open for a minimum of five (5) business days from the date the material change is first published, sent or given to stockholders, and, if material changes are made with respect to information that approaches the significance of price and share levels, a minimum of ten (10) business days may be required to allow for adequate dissemination and investor response. With respect to a change in price or, subject to certain limitations, a change in the percentage of securities sought or inclusion of or change to a dealer's soliciting fee, a minimum ten (10) business day period from the date of such change is generally required to allow for adequate dissemination to stockholders. Accordingly, if, prior to the Expiration Date, Purchaser decreases the number of Shares being sought or increases or decreases the consideration offered pursuant to the Offer, and if the Offer is scheduled to expire at any time earlier than the tenth business day from the date that notice of such increase 8 or decrease is first published, sent or given to stockholders, the Offer will be extended at least until the expiration of such tenth business day. For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or a federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, New York City time. In connection with the Offer, the Company has provided Purchaser with the names and addresses of all record holders of Shares and security position listings of Shares held in stock depositories. This Offer to Purchase, the related Letter of Transmittal and other relevant materials will be mailed to registered holders of Shares and will be furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. 2. PROCEDURE FOR ACCEPTING THE OFFER AND TENDERING SHARES. VALID TENDERS. Except as set forth below, in order for Shares to be validly tendered pursuant to the Offer, the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or an Agent's Message (as hereinafter defined) in connection with a book-entry transfer of Shares, and any other documents required by the Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase on or prior to the Expiration Date, and either (i) certificates representing tendered Shares must be received by the Depositary, or such Shares must be tendered pursuant to the procedure for book-entry transfer set forth below (and confirmation of receipt of such delivery must be received by the Depositary), in each case on or prior to the Expiration Date, or (ii) the guaranteed delivery procedures set forth below must be complied with. No alternative, conditional or contingent tenders will be accepted. SIGNATURE GUARANTEES. No signature guarantee is required on the Letter of Transmittal (i) if such Letter of Transmittal is signed by the registered holder of the Shares tendered therewith, unless such holder has completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" in the Letter of Transmittal, or (ii) if Shares are tendered for the account of a firm that is a member in good standing of the Security Transfer Agent's Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchange Medallion Program (each being hereinafter referred to as an "Eligible Institution"). In all other cases, all signatures on a Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 1 of the Letter of Transmittal. If a certificate representing Shares is registered in the name of a person other than the signatory of the Letter of Transmittal (or a facsimile thereof), or if payment is to be made, or Shares not accepted for payment or not tendered are to be registered in the name of a person other than the registered holder, the certificate must be endorsed or accompanied by an appropriate stock power, in either case signed exactly as the name(s) of the registered holder(s) appears on the certificate, with the signature(s) on the certificate or stock power guaranteed by an Eligible Institution. If the Letter of Transmittal or stock powers are signed or any certificate is endorsed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and, unless waived by Purchaser, proper evidence satisfactory to Purchaser of their authority to so act must be submitted. See Instruction 5 of the Letter of Transmittal. BOOK-ENTRY TRANSFER. The Depositary will establish accounts with respect to the Shares at The Depository Trust Company ("DTC") for purposes of the Offer within two (2) business days after the date of this Offer to Purchase, and any financial institution that is a participant in DTC's system may make book-entry delivery of the Shares by causing DTC to transfer such Shares into the Depositary's account in accordance with DTC's procedure for such transfer. However, although delivery of Shares may be effected through book-entry transfer at DTC, a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or an Agent's Message and any other required documents, must, in any case, be transmitted to and received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the guaranteed delivery procedures described below must be complied with. The term "Agent's Message" means a message transmitted through electronic means by DTC to, and received by, the Depositary and 9 forming a part of a book-entry confirmation, which states that DTC has received an express acknowledgment from the participant in DTC tendering the Shares that such participant has received, and agrees to be bound by, the terms of the Letter of Transmittal. DELIVERY OF DOCUMENTS TO DTC IN ACCORDANCE WITH DTC'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. GUARANTEED DELIVERY. If a stockholder desires to tender Shares pursuant to the Offer and such stockholder's certificates representing Shares are not immediately available (or the procedures for book-entry transfer cannot be completed on a timely basis) or time will not permit all required documents to reach the Depositary prior to the Expiration Date, such Shares may nevertheless be tendered, PROVIDED that all of the following conditions are satisfied: (a) such tender is made by or through an Eligible Institution; (b) the Depositary receives, prior to the Expiration Date, a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by Purchaser; and (c) the certificates representing all tendered Shares in proper form for transfer (or confirmation of a book-entry transfer of such Shares into the Depositary's account at DTC), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees (or, in connection with a book-entry transfer, an Agent's Message) and any other documents required by the Letter of Transmittal are received by the Depositary within three trading days after the date of such Notice of Guaranteed Delivery. A "trading day" is any day on which the New York Stock Exchange is open for business. The Notice of Guaranteed Delivery may be delivered by hand, or may be transmitted by facsimile transmission or mail, to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING CERTIFICATES FOR SHARES, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. DETERMINATION OF VALIDITY. All questions as to the form of documents and the validity, eligibility (including time of receipt) and acceptance for payment of any tendered Shares will be determined by Purchaser in its sole discretion, and its determination shall be final and binding on all persons. Purchaser reserves the absolute right to reject any or all tenders of any Shares that it determines are not in appropriate form or the acceptance for payment of or payment for which may, in the opinion of Purchaser's counsel, be unlawful. Purchaser also reserves the absolute right to waive any defect or irregularity in any tender with respect to any particular Shares or any particular stockholder, and Purchaser's interpretation of the terms and conditions of the Offer will be final and binding on all persons. No tender of Shares will be deemed to have been validly made until all defects or irregularities relating thereto have been expressly waived or cured to the satisfaction of Purchaser. None of Purchaser, Parent, the Depositary, the Dealer Manager, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders, nor shall any of them incur any liability for failure to give any such notification. OTHER REQUIREMENTS. By executing the Letter of Transmittal as set forth above, a tendering stockholder irrevocably appoints designees of Purchaser as such stockholder's proxy, in the manner set forth in the Letter of Transmittal, with full power of substitution, to the full extent of such stockholder's rights with respect to the Shares tendered by such stockholder and accepted for payment by Purchaser (and any and all other Shares or other securities or rights issued or issuable in respect of such Shares on or after the date of this Offer to Purchase), effective if, when and to the extent that Purchaser accepts such Shares for payment pursuant to the Offer. Upon such acceptance for payment, all prior proxies given by such stockholder with respect to such Shares or other securities accepted for payment will, without further action, be revoked, and no subsequent proxies may be given by such stockholder nor any subsequent written consents executed (and, if given or executed, will not be deemed effective). Such designees of Purchaser will, with respect to such Shares and other securities or rights issuable in respect 10 thereof, be empowered to exercise all voting and other rights of such stockholder as it, in its sole discretion, may deem proper in respect of any annual, special or adjourned meeting of the Company's stockholders, action by written consent in lieu of any such meeting or otherwise. Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, Purchaser must be able to exercise full voting rights with respect to the Shares accepted by Purchaser for payment immediately upon such acceptance. Purchaser's acceptance for payment of Shares tendered pursuant to any of the procedures described above will constitute a binding agreement between the tendering stockholder and Purchaser upon the terms and subject to the conditions of the Offer. To prevent federal backup withholding tax on payments made to stockholders with respect to Shares purchased pursuant to the Offer, each stockholder must provide the Depositary with his correct taxpayer identification number ("TIN") and certify that he is not subject to backup withholding by completing the Substitute Form W-9 included in the Letter of Transmittal. Non-United States holders must submit a completed Form W-8 or Form W-8BEN to avoid backup withholding. These forms may be obtained from the Depositary. See Instructions 10 and 11 of the Letter of Transmittal. 3. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer will be irrevocable, except that Shares tendered may be withdrawn at any time prior to the Expiration Date, and, unless theretofore accepted for payment by Purchaser as provided herein, may also be withdrawn on or after April 28, 2000 (or such later date as may apply if the Offer is extended). For a withdrawal of Shares tendered to be effective, a written, telegraphic, telex or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. Any notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name(s) in which the certificate(s) representing such Shares are registered, if different from that of the person who tendered such Shares. If certificates for Shares to be withdrawn have been delivered or otherwise identified to the Depositary, the name of the registered holder and the serial numbers shown on the particular certificates evidencing such Shares to be withdrawn must also be furnished to the Depositary prior to the physical release of the Shares to be withdrawn. The signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution (except in the case of Shares tendered by an Eligible Institution). If Shares have been tendered pursuant to the procedures for book-entry transfer set forth in Section 2, any notice of withdrawal must specify the name and number of the account at DTC to be credited with such withdrawn Shares and must otherwise comply with DTC's procedures. If Purchaser extends the Offer, is delayed in its acceptance for payment of any Shares tendered, or is unable to accept for payment or pay for Shares tendered pursuant to the Offer, for any reason whatsoever, then, without prejudice to Purchaser's rights set forth herein, the Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent that the tendering stockholder is entitled to and duly exercises withdrawal rights as described in this Section. Any such delay will be accompanied by an extension of the Offer to the extent required by law. Withdrawals of tenders of Shares may not be rescinded, and Shares properly withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered by again following the procedures described in Section 2 at any time prior to the Expiration Date or during a Subsequent Offering Period. No withdrawal rights will apply to Shares tendered into a Subsequent Offering Period and no withdrawal rights apply during the Subsequent Offering period with respect to Shares tendered in the Offer and accepted for payment. See Section 1. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by Purchaser, in its sole discretion, and its determination will be final and binding on all persons. None 11 of Parent, Purchaser, the Depositary, the Dealer Manager, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal, nor shall any of them incur any liability for failure to give any such notification. 4. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any extension or amendment), Purchaser will accept for payment and will pay for all Shares validly tendered prior to the Expiration Date and not properly withdrawn, as soon as practicable after the Expiration Date. Purchaser expressly reserves the right to delay acceptance for payment of, or payment for, Shares in order to comply in whole or in part with any applicable law. If Purchaser desires to delay payment for Shares accepted for payment pursuant to the Offer, and such delay would otherwise be in contravention of Rule 14e-1(c) of the Exchange Act, Purchaser will extend the Offer. See Section 1. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates representing such Shares (or a timely confirmation of a book-entry transfer of such Shares into the Depositary's account at DTC, as described in Section 2), (ii) a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees (or, in connection with a book-entry transfer, an Agent's Message), and (iii) any other documents required by the Letter of Transmittal. For purposes of the Offer, Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares tendered prior to the Expiration Date when, as and if Purchaser gives oral or written notice to the Depositary, as agent for the tendering stockholders, of Purchaser's acceptance for payment of such Shares. Payment for Shares so accepted for payment will be made by the deposit of the purchase price therefor with the Depositary, which will act as agent for the tendering stockholders for the purpose of receiving such payment from Purchaser and transmitting such payment to tendering stockholders. If, for any reason whatsoever, acceptance for payment of any Shares tendered pursuant to the Offer is delayed, or Purchaser is unable to accept for payment Shares tendered pursuant to the Offer, then, without prejudice to Purchaser's rights under Section 1, the Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares may not be withdrawn, except to the extent that the tendering stockholders are entitled to withdrawal rights as described in Section 3 and as otherwise required by Rule 14e-1(c) under the Exchange Act. Under no circumstances will interest be paid on the purchase price by reason of any delay in making such payments. If Purchaser has accepted for payment and paid for all Shares tendered prior to the Expiration Date but Purchaser has not reached 90% on a fully diluted basis, Purchaser intends to extend the Offer for an aggregate period not to exceed twenty (20) business days which period shall constitute a "Subsequent Offering Period." See Section 1. During the Subsequent Offering Period, Purchaser will accept for payment and promptly pay for all Shares validly tendered. The procedures for tendering Shares and guaranteed delivery set forth in Section 2 will apply during the Subsequent Offering Period. If any tendered Shares are not accepted for payment and paid for, certificates representing such Shares will be returned (or, in the case of Shares delivered by book-entry transfer with DTC as permitted by Section 2, such Shares will be credited to an account maintained with DTC) without expense to the tendering stockholder as promptly as practicable following the expiration or termination of the Offer. If, prior to the Expiration Date, Purchaser increases the consideration to be paid for Shares pursuant to the Offer, Purchaser will pay such increased consideration for all Shares accepted for payment or paid for pursuant to the Offer, whether or not such Shares have been tendered, accepted for payment or paid for prior to such increase in the consideration. Purchaser reserves the right to transfer or assign in whole or in part to one or more affiliates of Purchaser the right of Purchaser to purchase Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 12 5. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for Shares pursuant to the Offer (or in the Merger) will be a taxable transaction for United States federal income tax purposes (and may also be a taxable transaction under applicable state, local or other tax laws). In general, a stockholder will recognize gain or loss for such purposes equal to the difference between the amount of cash received and such stockholder's adjusted tax basis in the Shares. Gain or loss must be determined separately for each block of Shares (i.e., Shares acquired at the same cost in a single transaction) sold pursuant to the Offer or converted to cash in the Merger. Such gain or loss will be capital gain or loss if the Shares are a capital asset in the hands of the stockholder and will be long term capital gain or loss if the Shares were held for more than one year on the date of sale (in the case of the Offer) or the effective time of the Merger (in the case of the Merger). The receipt of cash for Shares pursuant to the exercise of dissenters' rights, if any, will generally be taxed in the same manner as described above. Payments in connection with the Offer or the Merger may be subject to "backup withholding" at a rate of 31%. Backup withholding generally applies if the stockholder (a) fails to furnish such stockholder's TIN, (b) furnishes an incorrect TIN, or (c) under certain circumstances, fails to provide a certified statement, signed under penalties of perjury, that the TIN provided is such stockholder's correct number and that such stockholder is not subject to backup withholding. Backup withholding is not an additional tax but merely an advance payment, which may be refunded to the extent it results in an overpayment of tax. Certain persons generally are entitled to exemption from backup withholding, including corporations, non-United States persons and financial institutions, provided they properly establish their status when required to do so by completing and providing the appropriate IRS forms. Certain penalties apply for failure to furnish correct information and for failure to include reportable payments in income. Each stockholder should consult with his own tax advisor as to such stockholder's qualification for exemption from backup withholding and the procedure for obtaining such exemption. Tendering stockholders may be able to prevent backup withholding by properly completing the Substitute Form W-9 included in the Letter of Transmittal. The foregoing discussion may not be applicable to a stockholder who acquired Shares pursuant to the exercise of employee stock options or otherwise as compensation, to a stockholder who is related to Purchaser for purposes of Section 302 of the Internal Revenue Code or to a stockholder who is not a United States person or who is otherwise subject to special tax treatment under the Internal Revenue Code (for example, brokers, dealers in securities, banks, insurance companies, tax-exempt organizations and financial institutions). For these purposes, a United States person means a person who or which is (i) an individual who is a citizen or resident of the United States for United States federal income tax purposes, (ii) a corporation or other entity taxable as a corporation created or organized under the laws of the United States or any state thereof (including the District of Columbia), (iii) an estate the income of which is subject to United States federal income tax regardless of its source, or (iv) a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust. In addition, the foregoing discussion does not address the tax treatment of holders of options to acquire Shares. THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL INFORMATION ONLY AND IS BASED UPON PRESENT LAW. STOCKHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF THE ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL OR NON-UNITED STATES INCOME AND OTHER TAX LAWS. 6. PRICE RANGE OF SHARES; DIVIDENDS. The Company's Common Stock is listed and traded on the New York Stock Exchange ("NYSE") under the symbol "SWD" and, prior to January 28, 1998, the Company's Common Stock was traded in the over-the-counter market on the Nasdaq National Market System under the symbol "SHOR." The following table sets forth, for the fiscal periods indicated, the high and low sales prices for the Common Stock on the NYSE and the Nasdaq National Market System with respect to periods occurring in fiscal years 1998, 1999 and 2000 as reported by published 13 financial sources. The Company has not paid any cash dividends on its Common Stock during either of its two most recent fiscal years, and the Merger Agreement prohibits the Company from declaring or paying any cash dividends prior to the earlier of the termination of the Merger Agreement or the Offer Completion Date.
FISCAL YEAR HIGH LOW - ----------- -------- -------- FISCAL 1998 First Quarter............................................... $15.33 $11.92 Second Quarter.............................................. $17.67 $12.92 Third Quarter............................................... $18.58 $15.17 Fourth Quarter.............................................. $18.92 $15.75 FISCAL 1999 First Quarter............................................... $16.19 $13.00 Second Quarter.............................................. $16.38 $12.13 Third Quarter............................................... $20.63 $13.13 Fourth Quarter.............................................. $19.94 $16.56 FISCAL 2000 First Quarter............................................... $20.00 $17.00 Second Quarter.............................................. $17.94 $12.38 Third Quarter............................................... $19.25 $11.75 Fourth Quarter (through February 28, 2000).................. $21.00 $14.00
The Rights trade together with the Common Stock. On February 16, 2000, the last full trading day prior to the public announcement of the execution of the Merger Agreement, the closing price per Share reported on the NYSE was $18.875. On February 28, 2000, the last full trading day before the commencement of the Offer, the closing price per Share reported on the NYSE was $20.8125. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES. 7. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise stated in this Offer to Purchase, the information concerning the Company contained herein has been taken from or is based upon reports and other documents on file with the SEC or otherwise publicly available. Although neither Purchaser nor Parent have any knowledge that would indicate that any statements contained herein based upon such reports and documents are untrue, neither Purchaser nor Parent takes any responsibility for the accuracy or completeness of the information contained in such reports and other documents or for any failure by the Company to disclose events that may have occurred and may affect the significance or accuracy of any such information but that are unknown to Purchaser or Parent. GENERAL. The Company is a Delaware corporation with its principal executive offices located at 277 Park Avenue, New York, New York 10172 where its telephone number is (212) 371-1500. The Company produces high quality specialized packaging, principally folding cartons and set up boxes, for its customers in the United States, Canada and China that require sophisticated precision graphic packaging for their products, including customers in the music and home entertainment industries, the tobacco industry, the software industry, the personal care, cosmetic and toiletries industries and in consumer markets such as the food, liquor, film, hosiery, consumer electronics and pharmaceutical industries. FINANCIAL INFORMATION. Set forth below is certain selected consolidated financial information relating to the Company and its subsidiaries which has been excerpted or derived from the audited financial statements contained in the Company's Annual Report on Form 10-K for the fiscal year ended May 1, 1999 and for the quarters ended October 30, 1999 and October 31, 1998, as contained in the Company's Quarterly Report on Form 10-Q for the quarter ended October 30, 1999 and October 31, 1998, which are incorporated by reference herein. More comprehensive financial information is included in such reports and other documents filed by the Company with the SEC. The financial information that follows is qualified in its entirety by reference to such reports and other documents, including the financial statements and related notes contained therein. Such reports and other documents may be examined and copies may be obtained from the offices of the SEC in the manner set forth below. 14 SHOREWOOD PACKAGING CORPORATION SELECTED CONSOLIDATED FINANCIAL DATA (In millions, except per share amounts)
26 WEEK PERIOD ENDED 52 WEEK PERIOD ENDED ------------------------- ------------------------------ OCTOBER 30, OCTOBER 31, MAY 1, MAY 2, MAY 3, 1999 1998 1999 1998 1997(1) ----------- ----------- -------- -------- -------- (UNAUDITED) (UNAUDITED) Income Statement Data (2): Net sales........................................... $309.0 $260.7 $552.2 $415.4 $425.3 Earnings from continuing operations................. 36.1 31.6 57.1 49.2 48.2 Earnings from continuing operations before extraordinary item and cumulative effect of a change in accounting principle.................... 28.1 27.4 34.3 26.3 24.9 Net earnings........................................ 19.3 13.4 31.0 26.3 23.4 Per Share Data: Basic Earnings Per Share Information: Earnings from continuing operations before extraordinary item and cumulative effect of a change in accounting principle per common share... $ .71 $ .63 $ 1.28 $ .97 $ .91 Net earnings per common share....................... .71 .51 1.16 .97 .85 Diluted Earnings Per Share Information: Earnings from continuing operations before extraordinary item and cumulative effect of a change in accounting principle per common share... $ .69 $ .62 $ 1.25 $ .95 $ .89 Net earnings per common share....................... .69 .49 1.13 .95 .83 Weighted average number of common shares............ 27.1 26.5 26.8 27.1 27.4 Weighted average number of common shares, assuming dilution.......................................... 27.9 27.1 27.6 27.7 28.1 Balance Sheet Data: Current assets...................................... $152.5 $134.7 $123.9 $ 95.8 $ 94.5 Net property, plant and equipment................... 247.2 244.9 243.4 200.3 156.2 Total assets........................................ 561.5 502.1 515.5 326.0 277.9 Current liabilities................................. 101.7 98.1 100.4 64.9 52.9 Long-term debt excluding current maturities......... 261.8 258.8 227.7 126.4 106.9 Stockholders' equity................................ 156.8 120.6 146.5 109.8 96.4
- ------------------------ (1) 53 week period. (2) The operations of the Company's transportation business have been reflected as discontinued operations for the period ended May 3, 1997, and for all prior periods. OTHER FINANCIAL INFORMATION. During the course of discussions between Parent and the Company, the Company provided Parent with certain projections, set forth below, showing estimated sales, net income and earnings per share for the Company for the fiscal years ending 2001, 2002, 2003 and 2004.
FISCAL YEAR ENDING 2001 2002 2003 2004 - ------------------ -------- -------- -------- -------- (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Sales........................................... $ 648 $ 695 $ 745 $ 798 Net Income...................................... $ 43 $ 49 $ 56 $ 63 Earnings Per Share.............................. $1.54 $1.74 $1.99 $2.27
The Company also informed Parent that the Company expected its revenues for its third quarter ended January 31, 2000 to be approximately $134 million compared to the $141 million reported for the comparable period last year. The Company also stated that its operating and net earnings would be lower than those reported in the comparable period last year. 15 AVAILABLE INFORMATION. The Shares are registered under the Exchange Act. Accordingly, the Company is subject to the informational filing requirements of the Exchange Act and, in accordance therewith, is obligated to file periodic reports, proxy statements and other information with the SEC relating to its business, financial condition and other matters. Information, as of particular dates, concerning the Company's directors and officers, their remuneration, stock options granted to them, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company is required to be disclosed in such proxy statements and distributed to the Company's stockholders and filed with the SEC. Such reports, proxy statements and other information should be available for inspection at the public reference facilities at the SEC's principal office at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the regional offices of the SEC located at 7 World Trade Center, Suite 1300, New York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The SEC maintains a site on the World Wide Web, and the reports, proxy statements and other information filed by the Company with the SEC may be accessed electronically on the World Wide Web at http://www.sec.gov. Copies of such material may also be obtained by mail, upon payment of the SEC's customary fees, from the SEC's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. 8. CERTAIN INFORMATION CONCERNING PARENT AND PURCHASER. GENERAL. Parent is a New York corporation incorporated in 1941 as the successor to the New York corporation of the same name organized in 1898, with its principal offices located at Two Manhattanville Road, Purchase, New York 10577. The telephone number of Parent is (914) 397-1500. Parent is a global paper and forest products company that produces printing and writing papers, pulp, tissue, paperboard and packaging and wood products. It also manufactures specialty chemicals and specialty panels and laminated products. Parent's primary markets and manufacturing and distribution operations are in the United States, Europe and the Pacific Rim. Parent distributes printing, packaging, graphic arts and industrial supply products, primarily manufactured by other companies, through over 250 distribution branches located primarily in the United States, and also engages in oil and gas and real estate activities in the United States. Parent has operations in nearly 50 countries, employs nearly 100,000 people and exports its products to more than 130 nations. Purchaser is a Delaware corporation with its principal offices located at Two Manhattanville Road, Purchase, New York 10577. The telephone number of Purchaser is (914) 397-1500. Purchaser is a wholly owned subsidiary of Parent. Purchaser has not carried on any activities other than in connection with the Merger Agreement. The name, citizenship, business address, business phone number, principal occupation or employment and five-year employment history for each of the directors and executive officers of Parent and Purchaser are set forth in Schedule I hereto. Except as described in this Offer to Purchase, (1) none of Parent, Purchaser nor, to the best knowledge of Parent and Purchaser, any of the persons listed in Schedule I to this Offer to Purchase or any associate or majority-owned subsidiary of Parent or Purchaser or any of the persons so listed, beneficially owns or has any right to acquire, directly or indirectly, any Shares and (2) none of Parent, Purchaser nor, to the best knowledge of Parent and Purchaser, any of the persons or entities referred to above nor any director, executive officer or subsidiary of any of the foregoing has effected any transaction in the Shares during the past 60 days. Except as provided in the Merger Agreement, the Stockholders Agreement or as otherwise described in this Offer to Purchase, none of Parent, Purchaser nor, to the best knowledge of Parent and Purchaser, any of the persons listed in Schedule I to this Offer to Purchase, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or voting of such securities, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss or the giving or withholding of proxies. Parent is the principal supplier of solid bleached sulfate ("SBS") board to the Company. The Company purchased approximately 68,800 tons of SBS board from Parent during the calendar year ended December 31, 1999 for an aggregate price of approximately $62,700,000. Except as set forth in this Offer to Purchase, none of Parent, Purchaser nor, to the best knowledge of Parent and Purchaser, any of the persons listed on Schedule I hereto, has 16 had any business relationship or transaction with the Company or any of its executive officers, directors or affiliates that is required to be reported under the rules and regulations of the SEC applicable to the Offer. Except as set forth in this Offer to Purchase, there have been no contacts, negotiations or transactions between Parent or any of its subsidiaries or, to the best knowledge of Parent, any of the persons listed in Schedule I to this Offer to Purchase, on the one hand, and the Company or its affiliates, on the other hand, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets. None of the persons listed in Schedule I have, during the past five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). None of the persons listed in Schedule I have, during the past five years, been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to federal or state securities, laws, or a finding of any violation of federal or state securities laws. 9. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by Purchaser to purchase Shares pursuant to the Offer and the Merger is estimated to be approximately $655,939,977 million. Purchaser will obtain such funds from Parent who will obtain such funds from internally generated funds including short-term borrowings in the ordinary course of its business. The Offer is not conditioned on any financing arrangements. 10. BACKGROUND OF THE OFFER AND THE MERGER; PAST CONTACTS OR NEGOTIATIONS WITH THE COMPANY. Prior to November 1999, executives of Parent were familiar with the business and operations of the Company because the Company was a significant customer of Parent and its subsidiaries and because Parent and its subsidiaries, on the one hand, and the Company and its subsidiaries, on the other, were in certain overlapping markets and shared certain customers. On November 18, 1999, the Company issued a press release disclosing that it had made a proposal to acquire Chesapeake Corporation ("Chesapeake") and that it had received a counterproposal from Chesapeake pursuant to which Chesapeake offered to purchase the Company at a price of $16.50 per Share in cash, which counterproposal the Company rejected. Shortly thereafter, executives of Parent began exploring the possibility of a business combination with the Company. During the week of November 22, 1999, Mr. David W. Oskin, an executive vice president of Parent, contacted Mr. Marc P. Shore, Chairman of the Board and Chief Executive Officer of the Company, to express an interest in a possible combination of the Company and Parent, as an alternative to the offer made by Chesapeake. Mr. Shore returned the telephone call the following week and expressed a willingness to meet with representatives of Parent. Parent has an ongoing relationship with Credit Suisse First Boston whereby Credit Suisse First Boston provides Parent with certain financial advisory services. Representatives of Parent first discussed the possible acquisition of the Company with Credit Suisse First Boston on November 18, 1999. On November 30, 1999, Chesapeake filed a Schedule 13D with the SEC disclosing that, on November 26, 1999, it entered into a stock purchase agreement to purchase 4,106,440 Shares, or approximately 14.9% of the outstanding Shares, from clients of Ariel Capital Management, Inc. for $17.25 per Share. On December 3, 1999, Chesapeake, through its wholly owned subsidiary, Sheffield, Inc. ("Sheffield"), commenced a tender offer to purchase the Company at a price of $17.25 per Share in cash (the "Chesapeake Offer"). In the Schedule 14D-1 filed by Chesapeake with respect to the Chesapeake Offer (the "Chesapeake Schedule 14D-1"), Chesapeake indicated that the purpose of the Chesapeake Offer was to facilitate the acquisition of a majority of the outstanding Shares as a first step in the acquisition of the Company. Chesapeake also disclosed in the Chesapeake Schedule 14D-1 that it was seeking to enter into negotiations with the Company with respect to a merger with Sheffield (the "Proposed Chesapeake Merger"), which it intended to consummate as soon as practicable after consummation of the Chesapeake Offer or in lieu of the Chesapeake Offer. According to the Chesapeake Schedule 14D-1, upon consummation of the Proposed Chesapeake Merger, each then outstanding Share (other than Shares held (1) by Sheffield or any other directly or indirectly owned subsidiary of Chesapeake, (2) in the Company's treasury and (3) by stockholders who properly exercised appraisal rights under the DGCL) 17 would be converted into the right to receive in cash and the price per Share paid by Sheffield pursuant to the Chesapeake Offer. Chesapeake indicated in the Chesapeake Schedule 14D-1 that it was willing to enter into negotiations with the Company's Board of Directors regarding the possibility of increasing its offer price after appropriate due diligence and access to the Company's business plan. In connection with the Chesapeake Offer, Chesapeake also filed a preliminary consent solicitation statement (the "Consent Solicitation Statement") with the SEC to, among other things, remove the current members of the Company's Board of Directors and replace them with Chesapeake's nominees and to repeal each provision of the Company's bylaws or amendments thereto adopted subsequent to November 22, 1999 (which date was later changed by Chesapeake to January 5, 2000). In addition, on December 3, 1999, Chesapeake and Sheffield commenced a lawsuit in the Delaware Court of Chancery (the "Court of Chancery") against the Company and each of the members of the Company's Board of Directors seeking, among other things, (i) an order declaring that the Company's Board of Directors breached its fiduciary duties by adopting certain amendments to the Company's bylaws, (ii) an order declaring that failure to redeem the Rights, or to render the Rights inapplicable to the Chesapeake Offer and the Proposed Chesapeake Merger, or to approve the Chesapeake Offer and the Proposed Chesapeake Merger would constitute a breach of the Company's Board of Directors' fiduciary duties under Delaware law, and (iii) an order compelling the Company's Board of Directors to approve the Chesapeake Offer and the Proposed Chesapeake Merger for purposes of Section 203 of the DGCL. Also on December 3, 1999, Chesapeake and Sheffield commenced litigation against the Company in the United States District Court for the District of Delaware seeking, among other things, a declaratory judgment that Chesapeake and Sheffield have disclosed all information required by, and are otherwise in full compliance with, the Exchange Act, and any other federal securities laws, rules or regulations deemed applicable to the Chesapeake Offer and the Consent Solicitation Statement. On December 7, 1999, Mr. Oskin, Mr. C. Cato Ealy, Vice President-Business Development and Planning of Parent, Mr. James Kennedy, an executive of Parent, and representatives of Credit Suisse First Boston met with Mr. Shore and Mr. Timothy O'Donnell, a director of the Company and the President of Jefferson Capital Group, Ltd., one of the Company's financial advisors, at the Company's offices to discuss the Company's situation and the possibility of a transaction involving Parent and the Company. On December 10, 1999, the Company and Parent entered into a Confidentiality Agreement in which Parent agreed, among other things, to keep information it obtained from the Company confidential, to refrain from soliciting employees of the Company, and not to make an unsolicited offer to acquire the Company. The next day, representatives of Parent and the Company discussed the Company's business plan and the possible synergies that would result from a combination of Parent and the Company during meetings at Parent's offices. At the December 14, 1999 meeting of the Parent's Board of Directors, the directors were apprised of the status of discussions with the Company but no recommendation was made to the Board of Directors and no action was taken. On December 15, 1999, the Company filed an answer and counterclaim to Chesapeake's complaint in the Court of Chancery and to Chesapeake's complaint in the United States District Court for the District of Delaware. On December 21, 1999, Mr. Oskin met with Mr. Shore to discuss a possible business combination. During their meeting, Mr. Shore informed Mr. Oskin that the Company was in the process of reviewing strategic alternatives to enhance stockholder value. Mr. Oskin then indicated that Parent would consider acquiring the Company at a price of $20.00 per Share, a price which Mr. Shore indicated was not, in his view, sufficiently preemptive to cause the Company to suspend its exploration of strategic alternatives. On December 22 and 23, 1999, Mr. Ealy and Mr. O'Donnell had several further discussions relating to Parent's interest in the Company and the methodology used by Parent to reach its indication of value. During a December 29, 1999 conference call with representatives of the Company, representatives of Parent reiterated the $20.00 per Share indication of value, which the Company again indicated was not sufficiently preemptive. On January 8, 2000, Mr. Oskin and Mr. Shore met and further discussed Parent's previous indication of value with respect to the Company. Throughout January 2000, the Company and Parent had intermittent conversations to 18 discuss ongoing developments although there were no revised proposals during this time period. During this period, the Chesapeake Offer remained outstanding and the Company and Chesapeake pursued the Delaware court litigation. Prior to February 1, 2000, the Company hired Greenhill & Co., LLC ("Greenhill") to act as financial advisor to the Special Committee of the Company's Board of Directors. On February 1, representatives of Greenhill and Mr. Shore met with Mr. Ealy, Mr. Oskin and representatives of Credit Suisse First Boston at Parent's offices. During that meeting, representatives of Greenhill informed Parent that the Company's Board of Directors would be meeting on February 8 and would be considering alternatives at such time. On February 7, 2000, the Chancery Court issued its decision in the Chesapeake litigation holding in favor of Chesapeake on the major issues. On February 8, 2000, Chesapeake requested that the Company set a record date for the Consent Solicitation Statement. Also on February 8, 2000, Parent's Board of Directors held a telephonic meeting and authorized Parent's management to proceed with an offer to acquire the Company for not more than $21.00 per Share. In the course of the Board meeting, several members of Parent's Board stressed the importance of ensuring that Parent and the Company had access, following an acquisition of the Company, to the services of Mr. Shore and other members of the Company's management. That afternoon, Mr. Oskin called representatives of Greenhill and informed them that Parent's valuation of the Company had not changed since December and that Parent was willing to pay a price of $20.50 per Share provided that the Company would agree to a termination fee equal to $1.00 per Share which would be payable to Parent if the Merger Agreement was terminated under certain circumstances. Mr. Oskin informed representatives of Greenhill that Parent was still considering whether it would prefer to pay the consideration all in cash or part in cash and part in Parent stock. Mr. Oskin informed representatives of the Company that, if Parent's indication of value was acceptable to the Company, Parent would promptly meet with rating agencies to discuss the possibility of an all-cash offer to acquire the Company. A representative of Greenhill contacted a representative of Credit Suisse First Boston on February 9, 2000 to discuss certain conditions and issues that, in the Company's view, would need to be resolved in order for the Company to proceed with a transaction with Parent. Representatives of the Company, Credit Suisse First Boston and Greenhill discussed those conditions, which included the Company's request for some improvement in the proposed price per Share, for consideration consisting solely of cash and for a reduction in the proposed termination fee. On February 10, 2000, following meetings with Moody's Investors Services, Inc. and Standard & Poor's Ratings Group, Parent made an internal decision that it would agree to an all-cash offer. Parent, Parent's counsel, the Company, the Company's counsel and representatives of Greenhill and Credit Suisse First Boston met on February 12, 2000, at Parent's headquarters to discuss the terms of a possible transaction between the Company and Parent. During this meeting, Parent indicated to the Company that, on the express condition that it receive a termination fee and expense reimbursement totaling $28 million, it would be willing to increase its previous indication of value of $20.50 per Share and, subject to the negotiation of the definitive form of the Merger Agreement and related agreements, including employment and non-competition agreements with Mr. Shore and Mr. Howard Liebman, President and Chief Financial Officer of the Company, Parent would be prepared to acquire all of the outstanding Shares for $21.00 per Share in cash through a tender offer for all of the Shares followed by a second-step merger. They agreed, over the next several days, to commence negotiation of a definitive Merger Agreement and to begin discussion of the terms on which Mr. Shore and Mr. Liebman would agree to work for the Company following its acquisition by Parent. On February 13, 2000, Parent's legal counsel distributed the first draft of the Merger Agreement to Company's legal counsel. In the days that followed, representatives of Parent and representatives of the Company spoke on several occasions and continued negotiating the terms of the Merger Agreement as well as the Stockholders Agreement and the employment and non-competition agreements for Mr. Shore and Mr. Liebman. During the afternoon of February 16, 2000, the Board of Directors of the Company met to consider the Merger Agreement, the Stockholders Agreement and the transactions contemplated thereby. Following that meeting, Parent was informed that the Company's Board of Directors had unanimously approved the Merger Agreement, the Offer 19 and the Merger, determined that the Offer and the Merger were advisable, fair to, and in the best interest of, the holders of Shares and unanimously resolved to recommend that the Company's stockholders accept the Offer and tender their Shares pursuant thereto and approve and adopt the Merger Agreement. The night of February 16, 2000, Parent, Purchaser and the Company executed and delivered the Merger Agreement and Parent, Purchaser and certain stockholders of the Company executed and delivered the Stockholders Agreement. In addition, Parent, Mr. Shore and Mr. Liebman executed and delivered documentation relating to their employment following the closing of the Offer. On February 17, 2000, prior to the opening of trading on the NYSE, each of Parent and the Company issued a press release announcing the execution of the Merger Agreement. A copy of the press release issued by Parent is filed as an exhibit to the Schedule TO referred to in Section 18 and is incorporated herein by reference. Later that day, Chesapeake issued a press release announcing that it would permit the Chesapeake Offer to expire at midnight, New York City time, on February 18, 2000 in accordance with its terms. Chesapeake also announced that it was withdrawing its request that the Company's Board of Directors set a record date in connection with the Consent Solicitation Statement. On February 29, 2000, Purchaser commenced the Offer. 11. THE MERGER AGREEMENT; STOCKHOLDERS AGREEMENT; EMPLOYMENT AGREEMENTS. THE MERGER AGREEMENT The following summary of certain provisions of the Merger Agreement is qualified in its entirety by reference to the complete text of the Merger Agreement, a copy of which has been filed as an exhibit to the Schedule TO referred to in Section 18 and is incorporated herein by reference. The following summary may not contain all of the information important to you. The Merger Agreement may be examined and copies may be obtained from the SEC in the same manner as set forth in Section 7. Capitalized terms used in the following summary and not otherwise defined in this Offer to Purchase shall have the meanings set forth in the Merger Agreement. THE OFFER. The Merger Agreement contemplates the commencement of the Offer. The obligation of Purchaser to accept for payment and pay for Shares tendered pursuant to the Offer is subject to the satisfaction or waiver of the Minimum Condition and the other Offer Conditions. For a description of the Offer Conditions, see Section 15. Under the terms of the Merger Agreement, neither Parent nor Purchaser may, without the prior written consent of the Company, (i) decrease the Offer Price, (ii) decrease the number of Shares sought in the Offer, (iii) change the form of consideration payable in the Offer, (iv) impose conditions to the Offer in addition to the Offer Conditions, (v) except as provided in the Merger Agreement or required by any rule, regulation, interpretation or position of the SEC, change the Expiration Date (as defined in the Merger Agreement), or (vi) otherwise amend any term of the Offer in a manner adverse to the holders of Shares. In addition, Purchaser may not, without the prior written consent of the Company, waive or amend the Minimum Condition. Notwithstanding the foregoing, Purchaser may, without the consent of the Company, extend the Offer beyond the initial Expiration Date in the following events: (i) from time to time if, at the initial Expiration Date (or any subsequent Expiration Date), any of the Offer Conditions (other than the Minimum Condition) shall not have been satisfied or waived, until such conditions are satisfied or waived; (ii) for any period required by any rule, regulation, interpretation or position of the SEC or the staff thereof applicable to the Offer or any period required by applicable law; (iii) if all the Offer Conditions (other than the Minimum Condition) are satisfied or waived, but the Minimum Condition has not been satisfied, for one or more periods not to exceed thirty (30) business days (for all such extensions); or (iv) if all of the Offer Conditions are satisfied or waived but the number of Shares validly tendered and not withdrawn is less than 90% of the number of then outstanding Shares on a fully diluted basis, for a period not to exceed twenty (20) business days (for all such extensions), PROVIDED that, in the case of an extension pursuant to clause (iv), Purchaser must accept and promptly pay for all securities tendered prior to the date of such extension and otherwise meet the requirements of Rule 14d-11 under the Exchange Act in connection with each such extension. Such an extension pursuant to clause (iv) would constitute a Subsequent Offering Period. See Section 1. In addition, Parent and Purchaser have agreed that Purchaser will from time to time extend the Offer, if requested by the Company, (i) if at the initial Expiration Date (or any subsequent Expiration Date), any of the Offer 20 Conditions other than (or in addition to) the Minimum Condition shall not have been waived or satisfied, until (taking into account all such extensions) the earlier of June 30, 2000 or such earlier date upon which any such condition (other than the Minimum Condition) shall not be reasonably capable of being satisfied prior to June 30, 2000; or (ii) if at the initial Expiration Date (or any subsequent Expiration Date), all of the Offer Conditions other than the Minimum Condition shall have been waived or satisfied and the Minimum Condition shall not have been satisfied, until the earlier of ten (10) business days after such expiration date or June 30, 2000. DIRECTORS. The Merger Agreement provides that promptly following the purchase of and payment for a number of Shares that satisfies the Minimum Condition, and from time to time thereafter, Purchaser will be entitled to designate the number of directors, rounded up to the next whole number, on the Board that equals the product of (i) the total number of directors on the Board (giving effect to the election of any additional directors by Purchaser) and (ii) the percentage that the number of Shares beneficially owned by Parent and Purchaser (including Shares paid for pursuant to the Offer), upon such acceptance for payment, bears to the total number of Shares outstanding, and the Company has agreed to take all action within its power to cause Purchaser's designees to be elected or appointed to the Board, including, without limitation, increasing the number of directors, and seeking and accepting resignations of incumbent directors. At such time, the Company will also use its best efforts to cause individual directors designated by Purchaser to constitute the number of members, rounded up to the next whole number, on (i) each committee of the Board other than any committee established to take action under the Merger Agreement and (ii) each board of directors of each subsidiary of the Company, and each committee thereof, that represents the same percentage as such individuals represent on the Board. Notwithstanding the foregoing, until the Effective Time the Board must have at least two directors who are directors on the date of the Merger Agreement and who are not officers of the Company (the "Continuing Directors"). The Company's obligations to appoint Purchaser's designees to the Board is subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. Following the election or appointment of Purchaser's designees and until the Effective Time, the approval of the Continuing Directors is required to authorize (and such authorization shall constitute the authorization of the Board and no other action on the part of the Company, including any action by any other director of the Company, shall be required to authorize) any termination of the Merger Agreement by the Company, any amendment of the Merger Agreement requiring action by the Board, any amendment of the certificate of incorporation or bylaws of the Company, any extension of time for performance of any obligation or action under the Merger Agreement by Parent or Purchaser, any waiver of compliance with any of the agreements or conditions in the Merger Agreement for the benefit of the Company and any material transaction with Parent, Purchaser or any affiliate thereof. THE MERGER. The Merger Agreement provides that, following the consummation of the Offer and subject to the terms and conditions thereof, at the Effective Time Purchaser will be merged with and into the Company and, as a result of the Merger, the separate corporate existence of Purchaser will cease, and the Company will continue as the Surviving Corporation and a direct wholly owned subsidiary of Parent. CONDITIONS TO THE MERGER. The obligation of Purchaser to effect the Merger is subject to the satisfaction or waiver of the following conditions: (i) Purchaser shall have completed the purchase of the Shares pursuant to the Offer, (ii) the Merger Agreement shall have been adopted by the requisite vote of the stockholders of the Company in accordance with the DGCL, (iii) no order, statute, rule, regulation, executive order, stay, decree, judgment or injunction which prohibits or prevents the consummation of the Merger shall have been entered, enacted, promulgated or enforced by any court or other governmental entity which prohibits or prevents the consummation of the Merger and which has not been vacated, dismissed or withdrawn prior to the Effective Time, and the Company and Parent have agreed to use all reasonable best efforts to have any of the foregoing vacated, dismissed or withdrawn by the Effective Time and (iv) all consents of any governmental entity required for the consummation of the Merger and the transactions contemplated by the Merger Agreement shall have been obtained, other than where the failure to obtain such consents will not have a material adverse effect on the business, assets, condition (financial or other), liabilities or results of operations of the Surviving Corporation and its subsidiaries taken as a whole. CONVERSION OF SHARES. At the Effective Time and without any action on the part of the holder thereof (i) each issued and outstanding Share (other than Shares that are held by stockholders properly exercising dissenters' rights 21 under the DGCL and Shares to be cancelled pursuant to clause (iii) below) will convert into the right to receive the Offer Price in cash payable to the holder thereof, without interest, upon surrender of the certificate representing such Share, (ii) each issued and outstanding share of common stock of Purchaser will be converted into and become one fully paid and non-assessable share of common stock of the Surviving Corporation, and (iii) each Share issued and held in the Company's treasury immediately before the Effective Time, and each Share held by Parent, Purchaser, any other subsidiary of Parent or any subsidiary of the Company immediately before the Effective Time, will be cancelled and retired without payment of any consideration therefor. If, during the period between the date of the Merger Agreement and the Effective Time, any change in the outstanding Shares occurs, including by reason of any reclassification, recapitalization, stock split or combination, exchange or readjustment of Shares, or stock dividend thereon with a record date during such period, the Offer Price and any other amounts payable pursuant to the Merger Agreement shall be appropriately adjusted. TREATMENT OF OPTIONS AND STOCK UNITS. The Company has agreed to take, prior to the initial Expiration Date, all actions necessary and appropriate to provide that at the Effective Time, each outstanding option to purchase Shares or other similar interest (collectively, the "Options") granted under any of the Company's stock option plans or under any other plan or arrangement (the "Option Plans") and outstanding warrant to purchase Shares (the "Warrants"), whether or not then exercisable or vested, shall be cancelled and, in exchange therefor, each holder of such Option or Warrant shall receive an amount in cash in respect thereof, if any, equal to the product of (i) the excess, if any, of the Offer Price over the per share exercise price thereof and (ii) the number of Shares subject thereto (such payment to be net of applicable withholding taxes). The Company has agreed to take, prior to the initial Expiration Date, all actions necessary and appropriate to provide that at the Effective Time, each outstanding stock unit granted pursuant to the Company's Incentive Program for Canadian Employees shall become vested and shall be cancelled, and in exchange therefor, each holder thereof shall be entitled to receive the Offer Price (such payment to be net of applicable withholding taxes). The Company has agreed to use its reasonable best efforts to obtain all necessary waivers, consents or releases from holders of Options, Warrants and stock units and has agreed to take any action as may be reasonably necessary give effect to, and to accomplish such transactions. STOCKHOLDERS' MEETING. Pursuant to the Merger Agreement, if required by applicable law to consummate the Merger, the Company has agreed to duly call, give notice of, convene and hold a special meeting of its stockholders as soon as practicable following the date on which Purchaser completes the purchase of shares of Common Stock pursuant to the Offer (the "Offer Completion Date") to vote on the Merger Agreement. Subject to its fiduciary duties under applicable law, the Board has agreed to include in the proxy statement relating to the Merger Agreement and the Merger its recommendation that stockholders of the Company vote in favor of the approval and adoption of the Merger Agreement and the Merger. Parent and Purchaser and any of their respective subsidiaries have agreed to vote, or cause to be voted, all Shares owned by them in favor of the Merger Agreement at the meeting. If Purchaser acquires at least a majority of the outstanding Shares in the Offer, it will have sufficient voting power to approve the Merger, even if no other stockholder votes in favor of the Merger. The Company is not required to take the foregoing actions if Parent or Purchaser may consummate the Merger without the vote or approval of the Company's stockholders in accordance with the short term merger provisions of Section 253 of the DGCL. REPRESENTATIONS AND WARRANTIES. Pursuant to the Merger Agreement, the Company has made customary representations and warranties to Parent and Purchaser with respect to, among other things: its existence, good standing and corporate authority; the authorization, validity and effect of agreements; capitalization; subsidiaries; other interests; no conflicts; required filings and consents; compliance with law; SEC filings; financial statements and undisclosed liabilities; absence of certain changes; material contracts; litigation; taxes; employee benefit plans; labor and employment matters; brokers; properties; environmental laws; related party transactions; intellectual property; the inapplicability of state takeover laws; product liability; opinions of financial advisors; the Rights Agreement; and accuracy of certain disclosure. Certain representations and warranties in the Merger Agreement made by the Company are qualified as to "materiality" or "Company Material Adverse Effect." For purposes of the Merger Agreement and this Offer to Purchase, the capitalized term "Company Material Adverse Effect" means a material adverse effect on (i) the 22 business, properties, operations results of operations or condition (financial or otherwise) of (x) the Company and the Company's subsidiaries taken as a whole or (y), for purposes of the representations and warranties section only, any one of the Company's plants; or (ii) the ability of the Company to perform its obligations under the Merger Agreement; PROVIDED, HOWEVER, none of the following are deemed, either alone or in combination, to constitute a "Company Material Adverse Effect": (i) a change in the market price or trading volume of Common Stock, (ii) any adverse change, event or effect that is caused by conditions affecting the economy of the United States generally or the economy of any nation or region in which the Company or any of its subsidiaries conducts business that is material to the business of such entity and its subsidiaries, taken as a whole or (iii) the Company's disclosure that its revenues and earnings for its third quarter ended January 31, 2000 would be less than previously anticipated. Pursuant to the Merger Agreement, Parent and Purchaser have made customary representations and warranties to the Company with respect to, among other things: their existence, good standing and corporate authority; the authorization, validity and effect of agreements; no conflicts; required filings and consents; brokers; accuracy of certain disclosure; the prior activities of Purchaser; and their ability to finance the transactions contemplated by the Merger Agreement. None of the representations and warranties made by Parent and Purchaser in the Merger Agreement survive the Effective Time and none of the Company's representations and warranties survive the Offer Completion Date. COVENANTS. The Merger Agreement contains various customary covenants of the parties. A description of these covenants follows. INTERIM OPERATIONS. The Company has agreed that, during the period from the date of the Merger Agreement and continuing until the earlier of the termination of the Merger Agreement or the Offer Completion Date, unless Parent shall otherwise agree in writing or as set forth in Section 5.1 of the disclosure letter delivered prior to the execution of the Merger Agreement to Parent, (the "Company Disclosure Letter") or as contemplated by the Merger Agreement, it will conduct its business and cause the businesses of its subsidiaries to be conducted only in the ordinary course of business and in a manner consistent with past practice; and use reasonable commercial efforts to preserve substantially intact the business organization of the Company and its subsidiaries, to keep available the services of the present officers, employees and consultants of the Company and its subsidiaries and to preserve the present relationships of the Company and its subsidiaries with customers, suppliers and other persons with which the Company or any of its subsidiaries has significant business relations. The Merger Agreement provides that, except as contemplated thereby or as required by applicable law or rule of any stock exchange or over-the-counter market, neither the Company nor any of its subsidiaries can, during the period from the date of the Merger Agreement and continuing until the earlier of the termination of the Merger Agreement or the Offer Completion Date, and except as set forth in Section 5.1 of the Company Disclosure Letter, directly or indirectly do, or propose to do, any of the following without the prior written consent of Parent: (a) Amend or otherwise change its certificate of incorporation or by-laws, or amend the Rights Agreement or reduce the Rights issued thereunder; (b) Issue, sell, pledge, dispose of or encumber or authorize the issuance, sale, pledge, disposition or encumbrance of, any shares of capital stock of any class, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of capital stock or any other ownership interest (including, without limitation, any phantom interest) in the Company, any of its subsidiaries or affiliates (except for the issuance of shares of Common Stock issuable pursuant to Options under the Option Plans, which options were outstanding on the date of the Merger Agreement); PROVIDED that the occurrence of a separation of the Rights under the Rights Agreement, and the related issuance of shares of Common Stock to the Company's stockholders thereunder shall not be deemed a breach of the Merger Agreement to the extent that (i) the occurrence of such separation occurred as a result of an unsolicited acquisition of Common Stock by a third party, and (ii) such acquisition did not occur as a result of the Company breaching its covenants discussed under "No Solicitation" below; 23 (c) Sell, pledge, dispose of or encumber any assets of the Company or any of its subsidiaries (except for (i) sales of inventory in the ordinary course of business and in a manner consistent with past practice, (ii) dispositions of obsolete or worthless assets and (iii) sales of assets not in excess of $1,000,000 in the aggregate); (d) (i) Declare, set aside, make or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of any of its capital stock, except that a wholly owned subsidiary of the Company may declare and pay a dividend to its parent, (ii) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, (iii) except as required by the terms of any security as in effect on the date of the Merger Agreement or expressly permitted under the Merger Agreement, amend the terms or change the period of exercisability of, purchase, repurchase, redeem or otherwise acquire, or permit any subsidiary to amend the terms or change the period of exercisability of, purchase, repurchase, redeem or otherwise acquire, any of its securities or any securities of its subsidiaries, including, without limitation, shares of Common Stock, or any option, warrant or right, directly or indirectly, to acquire any such securities, or propose to do any of the foregoing, or (iv) settle, pay or discharge any claim, suit or other action brought or threatened against the Company with respect to or arising out of a stockholder equity interest in the Company; (e) (i) Acquire (by merger, consolidation, or acquisition of stock or assets) any corporation, partnership or other business organization or division thereof; (ii) incur any indebtedness for borrowed money, except in the ordinary course of business or issue any debt securities or assume, guarantee (other than guarantees of the Company's subsidiaries entered into in the ordinary course of business) or endorse or otherwise as an accommodation become responsible for, the obligations of any person, make any loans or advances, except in the ordinary course of business consistent with past practice; or (iii) commit to make any capital expenditures or purchases of fixed assets which are, in the aggregate, in excess of $7,000,000; provided that the Company will consult with Parent with respect to any such commitment in excess of $1,000,000; or (iv) enter into or materially amend any contract, agreement, commitment or arrangement to effect any of the matters prohibited in this paragraph; (f) Except as set forth in the Company Disclosure Letter, increase the compensation or severance payable or to become payable to its directors, officers or employees, except for increases in salary or wages of employees of the Company or its subsidiaries (who are not directors or executive officers of the Company) in accordance with past practices, or grant any severance or termination pay (except payments required to be made under obligations existing on the date of the Merger Agreement in accordance with the terms of such obligations) to, or enter into any employment or severance agreement with, any employee of the Company or any of its subsidiaries, except for agreements with new employees entered into in the ordinary course of business and providing for annual base and bonus compensation not to exceed $150,000, or establish, adopt, enter into or amend any collective bargaining agreement, Plan (as defined in the Merger Agreement), trust, fund, policy or arrangement for the benefit of any current or former directors, officers or employees or any of their beneficiaries, except, in each case, as may be required by law or as would not result in a material increase in the cost of maintaining such collective bargaining agreement, Plan, trust, fund, policy or arrangement; (g) Take any action to change accounting policies or procedures (including, without limitation, procedures with respect to revenue recognition, payments of accounts payable and collection of accounts receivable), except as required by a change in generally accepted accounting principles or SEC position occurring after the date of the Merger Agreement; (h) Except in the ordinary course of business, make any tax election or settle or compromise any material United States federal, state, local or non-United States tax liability; (i) Pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise) in excess of $1,000,000 in the aggregate, other than the payment, discharge or satisfaction in the ordinary course of business and consistent with past practice of liabilities reflected or reserved against in the financial statements contained in the Company's SEC filings or incurred in the ordinary course of business and consistent with past practice; or 24 (j) Take, or agree in writing or otherwise to take, any of the aforementioned actions, or any action which would make any of the representations or warranties of the Company contained in the Merger Agreement untrue or incorrect or prevent the Company from performing or cause the Company not to perform its covenants under the Merger Agreement. NO SOLICITATION. In the Merger Agreement, the Company has agreed to not, directly or indirectly, or through any officer, director, employee, representative or agent of the Company or any of its subsidiaries, and to not permit any such officer, director, employee, representative or agent to, solicit or encourage the initiation of (including by way of furnishing information) any inquiries or proposals regarding, or participate in negotiations or discussions concerning any merger, sale of assets, sale of shares of capital stock (including without limitation by way of a tender offer) or similar transactions involving the Company or any subsidiaries of the Company that if consummated would constitute an Alternative Transaction (as defined below) (any of the foregoing inquiries or proposals being referred to herein as an "Acquisition Proposal"). Upon the execution of the Merger Agreement, the Company agreed to immediately cease any discussions or negotiations with any person, entity or group (other than Parent or any of its affiliates or representatives) concerning any such transaction or any Acquisition Proposal that were continuing on the date of the Merger Agreement and agreed to seek to have returned to the Company any confidential information that had been provided in any such discussions or negotiations. The foregoing will not prevent the Board from (i) furnishing information to a third person which has made a BONA FIDE Acquisition Proposal that the Board reasonably determines is likely to lead to a Superior Proposal (as defined below) not solicited in violation of the Merger Agreement, PROVIDED THAT, with respect to any person that was not party to a confidentiality agreement with the Company as of the date of the Merger Agreement, such person has executed an agreement with confidentiality, standstill and other provisions substantially similar to those then in effect between the Company and Parent, or (ii) subject to compliance with the other terms of this provision, considering and negotiating a bona fide Acquisition Proposal that is a Superior Proposal not solicited in violation of the Merger Agreement; PROVIDED, HOWEVER, that, as to each of clauses (i) and (ii), (x) such actions occur at a time prior to the consummation (or, if the Offer is consummated and extended, the initial consummation) of the Offer and (y) the Board determines in good faith (based on the advice of its financial advisor and counsel) that it is required to take such actions in order to discharge properly its fiduciary duties. The term "Superior Proposal" is defined in the Merger Agreement to mean any proposal made by a third person to acquire, directly or indirectly, for consideration consisting of cash and/or securities, all of the equity securities of the Company entitled to vote generally in the election of directors or all or substantially all the assets of the Company, if, and only if, the Board reasonably determines (after consultation with its financial advisor and counsel) (i) that the proposed transaction would be more favorable from a financial point of view to its stockholders than the Offer and the Merger and the transactions contemplated by the Merger Agreement taking into account at the time of determination any changes to the terms of the Merger Agreement which as of that time had been proposed by Parent and (ii) that the person or entity making such Acquisition Proposal is capable of consummating such Acquisition Proposal (based upon, among other things, the availability of financing and the degree of certainty of obtaining financing, the expectation of obtaining required regulatory approvals and the identity and background of such person). The Company has agreed to notify Parent promptly upon receipt of any Acquisition Proposal, or any modification of or amendment to any Acquisition Proposal, or any request for nonpublic information relating to the Company or any of its subsidiaries in connection with an Acquisition Proposal or for access to the properties, books or records of the Company or any subsidiary by any person or entity that informs the Board or such subsidiary that it is considering making, or has made, an Acquisition Proposal. Such notice to Parent shall be made orally and in writing, and shall indicate the identity of the person making the Acquisition Proposal or intending to make an Acquisition Proposal or requesting non-public information or access to the books and records of the Company, the terms of any such Acquisition Proposal or modification or amendment to an Acquisition Proposal, and whether the Company is providing or intends to provide the person making the Acquisition Proposal with access to information concerning the Company as provided in this section. The Company shall also promptly notify Parent, orally and in writing, if it enters into negotiations concerning any Acquisition Proposal. Except as provided in the following sentence, the Company has agreed that neither it nor the Board will withdraw or modify in a manner adverse to Parent or Purchaser, or propose to withdraw or modify in a manner 25 adverse to Parent or Purchaser, or fail at Parent's request to reaffirm the approval by such Board of the Merger Agreement, the Offer or the Merger or the favorable recommendation of the Board with respect thereto. The foregoing notwithstanding, in the event that, after the Company has received a BONA FIDE Acquisition Proposal not solicited in violation of the Merger Agreement, the Board determines (based on the advice of its counsel), prior to the consummation (or, if the Offer is consummated and extended, the initial consummation) of the Offer, that it is required to do so in order to discharge properly its fiduciary duties, the Board may (x) withdraw or modify its approval or recommendation of the Merger Agreement, the Offer or the Merger and disclose to the Company's stockholders a position contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act or otherwise make disclosure to them, or (y) approve or recommend such an Acquisition Proposal that is a Superior Proposal; PROVIDED, HOWEVER, that in no event may the Board take either such action earlier than the second full business day following Parent's receipt of written notice of the intention of the Board to do so. The Company and the Board have agreed not to (i) redeem the Rights under the Rights Agreement, or waive or amend any provision of the Rights Agreement, in any such case to permit or facilitate the consummation of any Acquisition Proposal or Alternative Transaction, or (ii) enter into any agreement with respect to, or otherwise approve or recommend to stockholders, or publicly propose to approve or recommend, any Acquisition Proposal or Alternative Transaction, unless the Merger Agreement has been terminated in accordance with its terms. In addition, the Company has agreed to not release any third party from the confidentiality and standstill provisions of any agreement to which the Company is a party. INDEMNIFICATION AND INSURANCE. The Merger Agreement provides that the certificate of incorporation and by-laws of the Surviving Corporation will contain provisions with respect to indemnification substantially to the same effect as those set forth in the certificate of incorporation and the by-laws of the Company on the date of the Merger Agreement, which provisions shall not be amended, modified or otherwise repealed for a period of six (6) years after the Effective Time in any manner that would adversely affect the rights thereunder as of the Effective Time of individuals who at the Effective Time were directors, officers, employees or agents of the Company, unless such modification is required after the Effective Time by law. In addition, Parent has agreed to cause the Surviving Corporation, to the fullest extent permitted under applicable law or under the Surviving Corporation's certificate of incorporation or by-laws, to indemnify and hold harmless, each present and former director, officer or employee of the Company or any of its subsidiaries (the "Indemnified Parties") against any costs or expenses (including attorneys' fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, (x) arising out of or pertaining to the transactions contemplated by the Merger Agreement or (y) otherwise with respect to any acts or omissions occurring at or prior to the Effective Time, to the same extent as provided in the Company's certificate of incorporation or by-laws or any applicable contract or agreement as in effect on the date of the Merger Agreement, in each case for a period of six (6) years after the date of the Merger Agreement. In addition, Parent has agreed to provide, or cause the Surviving Corporation to provide, for a period of not less than six (6) years after the Effective Time, the Company's current directors and officers an insurance and indemnification policy that provides coverage for events occurring at or prior to the Effective Time (the "D&O Insurance") that is no less favorable than the policy existing on the date of the Merger Agreement or, if substantially equivalent insurance coverage is unavailable, the best available coverage; PROVIDED, HOWEVER, that Parent and the Surviving Corporation will not be required to pay an annual premium for the D&O Insurance in excess of one and one-half of the annual premium currently paid by the Company for such insurance, but in such case will purchase as much such coverage as possible for such amount. The Merger Agreement provides that these indemnification and insurance provisions will survive the consummation of the Merger at the Effective Time and are intended to benefit the Company, the Surviving Corporation and the Indemnified Parties and will be binding on all successors and assigns of the Surviving Corporation and enforceable by the Indemnified Parties. 26 EMPLOYEE BENEFITS. For the one-year period following the Effective Time, Parent has agreed to provide, or cause the Surviving Corporation and its subsidiaries and successors to provide, those persons who, immediately prior to the Effective Time, were employees of the Company and its subsidiaries and who continue in such employment ("Continuing Employees"), with benefits and compensation that are substantially comparable, in the aggregate, to the compensation and benefits provided to such employees as of the date of the Merger Agreement; PROVIDED, that such agreement will not restrict Parent or the Surviving Corporation from terminating the employment of any such employees in accordance with applicable laws and contractual rights, if any, of such employees. Except with respect to accruals under any defined benefit pension plan, Parent has agreed to, or to cause the Surviving Corporation and its subsidiaries to, give Continuing Employees full credit for purposes of eligibility, vesting and determination of the level of benefits under any employee benefit plans or arrangements maintained by Parent, the Surviving Corporation or any subsidiary of Parent or the Surviving Corporation for such Continuing Employees' service with the Company or any subsidiary of the Company to the same extent recognized by the Company for similar purposes immediately prior to the Effective Time. Parent has agreed to, or to cause the Surviving Corporation and its subsidiaries to, (i) waive all limitations as to preexisting conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to the Continuing Employees under any welfare plan that such employees may be eligible to participate in after the Effective Time, other than limitations or waiting periods that are already in effect with respect to such employees and that have not been satisfied as of the Effective Time under any welfare plan maintained for the Continuing Employees immediately prior to the Effective Time, and (ii) provide each Continuing Employee with credit for any co-payments and deductibles paid prior to the Effective Time in satisfying any applicable deductible or out-of-pocket requirements under any welfare plans that such employees are eligible to participate in after the Effective Time to the same extent as if those deductibles or co-payments had been paid under the welfare plans for which such employees are eligible after the Effective Time. For purposes of the Plans, the Offer Completion Date will constitute a "Change in Control" of the Company (as such term or similar term is defined in an applicable Plan). The Parent has agreed to (i) cause the Surviving Corporation after the Offer Completion Date to pay all amounts provided under all Plans in accordance with their terms and (ii) honor and cause the Surviving Corporation to honor all rights, privileges and modifications to or with respect to any such Plans which become effective as a result of such Change in Control. FINANCIAL INFORMATION. The Company has agreed to deliver to Parent, as soon as reasonably practicable such financial information as Parent may request to the extent such financial information is regularly prepared by the Company for the Board or for management. TERMINATION. The Merger Agreement may be terminated at any time prior to the Effective Time, notwithstanding approval thereof by the stockholders of the Company: (a) by mutual written consent of Parent and the Company; or (b) by either Parent or the Company if the initial consummation of the Offer does not occur on or prior to June 30, 2000; PROVIDED, HOWEVER, that the right to terminate under this clause is not available to any party whose failure to fulfill any obligation under the Merger Agreement has been the cause of, or resulted in, the failure of the Offer to be consummated on or prior to such date; or (c) by either Parent or the Company if, as the result of the failure of any of the Offer Conditions, the Offer shall have terminated or expired in accordance with its terms without Purchaser having purchased any Shares pursuant to the Offer, PROVIDED that if the failure to satisfy any of the Offer Conditions shall be a basis for termination of the Merger Agreement under any other termination provision, a termination pursuant to this clause shall be deemed a termination under such other provision; or 27 (d) by either Parent or the Company if a court of competent jurisdiction or governmental, regulatory or administrative agency or commission shall have issued a nonappealable final order, decree or ruling or taken any other nonappealable final action having the effect of permanently restraining, enjoining or otherwise prohibiting the Merger; or (e) by Parent, if, whether or not permitted to do so by the Merger Agreement, the Board or the Company shall (x) (i) withdraw, modify or change its approval or recommendation of the Offer, the Merger Agreement or the Merger in a manner adverse to Parent, (ii) approve or recommend to the stockholders of the Company an Acquisition Proposal or Alternative Transaction or (iii) approve or recommend that the stockholders of the Company tender their shares in any tender or exchange offer that is an Alternative Transaction or (y) take any public position or make any disclosures to the Company's stockholders, whether or not permitted pursuant to the Merger Agreement, which has the effect of any of the foregoing; or (f) by Parent or the Company, if any representation or warranty of the Company or Parent, respectively, set forth in the Merger Agreement shall be untrue when made, if such failure to be true and correct, individually or in the aggregate, is reasonably likely to cause the failure of the condition to the Offer discussed under clause 3(e) of Section 15 of this Offer to Purchase ("Certain Conditions of the Offer"); PROVIDED that, if such failure is curable prior to the initial Expiration Date (or any subsequent Expiration Date) by the Company or Parent, as the case may be, through the exercise of its reasonable best efforts and for so long as the Company or Parent, as the case may be, continues to exercise such reasonable best efforts, neither Parent nor the Company, respectively, may terminate the Merger Agreement under this clause until such initial Expiration Date (or subsequent Expiration Date); or (g) by Parent or the Company, if any representation or warranty of the Company or Parent, respectively, set forth in the Merger Agreement, shall have become untrue (without for this purpose giving effect to qualifications of materiality contained in such representations and warranties) if such failure to be true and correct, individually or in the aggregate, is reasonably likely to cause the failure of the condition to the Offer discussed under clause 3(e) of Section 15 of this Offer to Purchase ("Certain Conditions of the Offer"), other than by reason of a Terminating Breach (as hereinafter defined); PROVIDED that, if any such failure is curable prior to the initial Expiration Date (or any subsequent Expiration Date) by the Company or Parent, as the case may be, through the exercise of its reasonable best efforts, and for so long as the Company or Parent, as the case may be, continues to exercise such reasonable best efforts, neither Parent nor the Company, respectively, may terminate the Merger Agreement under this clause until such initial Expiration Date (or subsequent Expiration Date); or (h) by Parent or the Company, upon a material breach of any covenant or agreement on the part of the Company or Parent, respectively, set forth in the Merger Agreement (a "Terminating Breach"); PROVIDED that, except for any breach of the Company's obligations discussed under the heading "No Solicitation" in this section, if such Terminating Breach is curable prior to the initial Expiration Date (or any subsequent Expiration Date) by the Company or Parent, as the case may be, through the exercise of its reasonable best efforts and for so long as the Company or Parent, as the case may be, continues to exercise such reasonable best efforts, neither Parent nor the Company, respectively, may terminate the Merger Agreement under this clause until such date; or (i) by the Company, in order to accept a Superior Proposal; PROVIDED that (A) the Offer shall not theretofore have been consummated (or, if the Offer is consummated and extended, initially consummated); (B) the Board determines (based on the advice of counsel) that it is required to accept such proposal in order to discharge properly its fiduciary duties; (C) the Company has given Parent two full business days' advance notice of the Company's intention to accept such Superior Proposal; (D) the Company shall have paid the Fee and the Expense Reimbursement (as defined below); and (E) the Company shall have complied in all respects with provisions discussed under the heading "No Solicitation" in this section. 28 Notwithstanding the foregoing, the right to terminate the Merger Agreement pursuant to clauses (e), (f), (g), (h) and (i) above shall not be available to Parent if Purchaser or any other affiliate of Parent shall have acquired Shares pursuant to the Offer. As used in the Merger Agreement, "Alternative Transaction" means any of (i) a transaction pursuant to which any person (or group of persons) (including the shareholders of any party to such transaction) other than Parent or its affiliates (a "Third Party") acquires or would acquire more than 30% of the outstanding shares of any class of equity securities of the Company, whether from the Company or pursuant to a tender offer or exchange offer or otherwise, (ii) a merger or other business combination involving the Company pursuant to which any Third Party acquires more than 30% of the outstanding equity securities of the Company or the entity surviving such merger or business combination, (iii) any transaction pursuant to which any Third Party acquires or would acquire control of assets (including for this purpose the outstanding equity securities of subsidiaries of the Company and securities of the entity surviving any merger or business combination including any of the Company's subsidiaries) of the Company, or any of its subsidiaries having a fair market value (as determined by the Board in good faith) equal to more than 30% of the fair market value of all the assets of the Company and its subsidiaries, taken as a whole, immediately prior to such transaction or (iv) any other consolidation, business combination, recapitalization or similar transaction involving the Company or any of the Company's subsidiaries that are "significant" under Regulation S-X at a level of 30% or more, other than the transactions contemplated by the Merger Agreement; PROVIDED, HOWEVER, that the term Alternative Transaction shall not include any acquisition of securities by a broker dealer in connection with a bona fide public offering of such securities. FEES AND EXPENSES. Except as specified below, all fees and expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby will be paid by the party incurring such expenses, whether or not the Merger is consummated. The Company has agreed to pay Parent a fee of $25,000,000 (the "Fee") and to also pay Parent $3,000,000 to reimburse Parent for its itemized out-of-pocket expenses in connection with the transactions contemplated by the Merger Agreement (the "Expense Reimbursement") upon the first to occur of any of the following events: (1) the termination of the Merger Agreement by Parent or the Company pursuant to clause (b), (c), (f) or (g) above; PROVIDED that an Alternative Transaction shall be publicly announced by the Company or any third party within twelve months following the date of such termination and such transaction shall at any time thereafter be consummated on substantially the terms theretofore announced; PROVIDED FURTHER that if the termination of the Merger Agreement is pursuant to clause (g) above, such Alternative Transaction, if all cash, must be no less favorable from a financial point of view to the stockholders of the Company than the transactions contemplated by the Offer and Merger, unless the events giving rise to the breach underlying such termination relate to the third party with whom the Alternative Transaction was consummated; (2) the termination of the Merger Agreement by Parent pursuant to clause (e) or (h) above; or (3) the termination of the Merger Agreement by the Company pursuant to clause (i) above. The Company has also agreed to pay to Parent the Expense Reimbursement (in which case such payment shall be credited against any subsequent payment that may become due to Parent under clause (1) above) under the following circumstances: (a) upon termination of the Merger Agreement by Parent pursuant to clause (c) above in the event of the failure of the Minimum Condition to be satisfied or (b) upon termination of the Merger Agreement by Parent pursuant to clause (f) above. 29 STOCKHOLDERS AGREEMENT. As an inducement to Parent to enter into the Merger Agreement with the Company, Shore Family Partnership, L.P., Marc P. Shore, Paul Shore Estate Marital Trust, Andrew N. Shore, Paul Shore Marital Trust, and Howard M. Liebman (the "Stockholders"), who in the aggregate own approximately 17% of the outstanding Shares (approximately 15% on a fully diluted basis), have each entered into a stockholders agreement (the "Stockholders Agreement") with Parent and Purchaser. The following summary of certain provisions of the Stockholders Agreement is qualified in its entirety by reference to the complete text of the Stockholders Agreement, a copy of which is filed as an exhibit to the Schedule TO and is incorporated herein by reference. You may examine or obtain copies of the Stockholders Agreement in accordance with the procedures set forth in Section 7. Each Stockholder has agreed to tender all of his Shares into the Offer and to not withdraw any Shares so tendered. In addition, each Stockholder has agreed to enter into such agreements and take such actions as are necessary to provide that all Options held by such Stockholder are cashed out in connection with the Merger. In addition, except as set forth in the Stockholders Agreement, each Stockholder has agreed not to transfer any or all of such Stockholder's Shares or any interest therein (except as contemplated by the Stockholders Agreement), enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of his Shares or any interest therein, grant any proxy, power-of-attorney or other authorization or consent in or with respect to his Shares, deposit his Shares into a voting trust or enter into a voting arrangement or agreement with respect to his Shares or take any other action that would in any way restrict, limit or interfere with his obligations under the Stockholders Agreement. Each Stockholder has also agreed to vote (or cause to be voted) his Shares in favor of the Merger, the Merger Agreement and each of the other transactions contemplated by the Merger Agreement at any meeting of stockholders of the Company called to vote upon the Merger and the Merger Agreement or at any adjournment thereof or in any other circumstances upon which a vote, consent or other approval (including by written consent) with respect to the Merger and the Merger Agreement is sought, or initiate a written consent solicitation if requested by Parent. Each Stockholder has also agreed to vote against or refrain from giving any consent in favor of, and not to tender his Shares into any offer relating to, (i) any merger agreement or merger (other than the Merger Agreement and the Merger), consolidation, combination, sale of substantial assets, reorganization, joint venture, recapitalization, dissolution, liquidation or winding up of or by the Company and (ii) any amendment of the Company's certificate of incorporation or by-laws or other proposal or transaction including any consent solicitation to remove or elect any directors of the Company) involving the Company or any of its subsidiaries which amendment or other proposal or transaction would in any manner impede, frustrate, prevent or nullify, or result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under or with respect to, the Offer, the Merger, the Merger Agreement or any of the other transactions contemplated by the Merger Agreement. Each Stockholder has granted to Parent an irrevocable proxy with full power of substitution and resubstitution which shall be deemed coupled with an interest to vote such Stockholder's Shares as contemplated by this paragraph. Each Stockholder has made certain representations and warranties in the Stockholders Agreement, including with respect to (i) ownership of his Shares, (ii) the authority to enter into and perform his obligations under such Stockholders Agreement and the absence of required consents and statutory or contractual conflicts or violations, (iii) the absence of liens, claims, security interests, proxies, voting trusts or other arrangements or any other encumbrances on or in respect of his Shares, except for those disclosed to Purchaser, (iv) broker's and finder's fees and (v) an acknowledgment of Parent's reliance upon the Stockholder's execution of the Stockholders Agreement in entering into, and causing Purchaser to enter into, the Merger Agreement. The Stockholders Agreement, and all rights and obligations thereunder, terminate upon the earlier of (a) the date upon which the Merger Agreement is terminated in accordance with its terms or (b) the date that Parent or 30 Purchaser shall have purchased and paid for the Shares of such Stockholder pursuant to the terms of the Stockholders Agreement; PROVIDED, HOWEVER, that the termination of the Stockholders Agreement shall not relieve any party of liability for breach of such agreement prior to its termination. EMPLOYMENT AGREEMENTS WITH CERTAIN OFFICERS. The following summaries of certain provisions of letter agreements relating to the employment of Marc P. Shore and Howard M. Liebman are qualified in their entirety by reference to the complete text of those letter agreements, copies of which have been filed as exhibits to the Schedule TO referred to in Section 18 and are incorporated herein by reference. In connection with the Merger Agreement, on February 16, 2000, Parent and each of Mr. Shore and Mr. Liebman entered into letter agreements providing that the employment agreements described below would become automatically effective upon execution by Parent and the Company at the time of Purchaser's first purchase of Shares pursuant to the Offer (the "First Purchase Date"). Mr. Shore's employment agreement (the "Shore Employment Agreement") will supersede Mr. Shore's current employment agreement with the Company, except that Mr. Shore's obligation to repay the unearned portion of the $1,000,000 signing bonus he received in connection with the execution of his existing employment agreement will survive if Mr. Shore terminates his employment without "Good Reason" or if he is terminated for "Cause" (each as defined in the Shore Employment Agreement). The Shore Employment Agreement provides that Mr. Shore will serve as the President of the Company, on a full-time basis, for the period commencing on the First Purchase Date and ending on December 31, 2004. The Shore Employment Agreement further provides that Mr. Shore shall receive an annual salary of $500,000, an annual bonus, not to exceed $450,000, based upon target performance objectives established by a senior officer of Parent, a separate guaranteed bonus of $112,000 for the period of service from the date of the Shore Employment Agreement through December 31, 2000, and a separate guaranteed bonus of $150,000 each subsequent year during the term of the Shore Employment Agreement. Effective as of the First Purchase Date, Parent shall grant Mr. Shore a nonqualified stock option to purchase 20,000 shares of Parent common stock at a price per share equal to the fair market value of such stock on the First Purchase Date. Thereafter Mr. Shore shall be eligible to receive such additional stock option awards as the Board of Directors of Parent may determine. In addition, on the First Purchase Date, Mr. Shore shall receive that number of shares of common stock of Parent having a fair market value as of the First Purchase Date of $1,000,000, which shares shall be nontransferable and subject to forfeiture until vested. One-fifth of these restricted shares will vest on December 31, 2000 and on December 31 of each of the four subsequent years, provided that Mr. Shore achieves the target performance objectives for each such year. Also pursuant to the terms of the Shore Employment Agreement, for a one-year period following the effective date of the Merger, the Company shall provide Mr. Shore with benefits substantially comparable in the aggregate to the benefits provided to Mr. Shore as of the date of the Merger Agreement. Notwithstanding this agreement to extend Mr. Shore's benefits for one year, the Company has agreed to extend the split-dollar life insurance benefit and the automobile lease allowance and expense reimbursement only until December 31, 2000. Under the Shore Employment Agreement, Mr. Shore is entitled to certain payments upon termination of his employment. If Mr. Shore's employment is terminated because of his death, or if the Company terminates his employment based on a good faith determination that he has become disabled, the employment agreement shall terminate without further obligations, except that the Company shall pay to Mr. Shore or his legal representative: unpaid base salary through the date of termination, any unpaid performance or guaranteed bonus for the prior calendar year, any prorated bonus otherwise payable under the Shore Employment Agreement for the year of termination, and unpaid accrued vacation pay (collectively, the "Shore Accrued Obligations"). Likewise, if the Company terminates Mr. Shore's employment for "Cause" (as defined in the Shore Employment Agreement), the Company need only pay the Shore Accrued Obligations. If the Company terminates Mr. Shore's employment other than for Cause or as a result of his death or disability, or if Mr. Shore terminates his employment with "Good Reason" (as defined in the Shore Employment Agreement), the Company shall pay to Mr. Shore: the Shore Accrued Obligations, severance pay of not more than one year of base salary, and the guaranteed bonus for the year his employment terminates. In addition, the restricted stock options shall vest immediately and become 31 non-forfeitable, in the event that Mr. Shore's employment is terminated because of his death or disability, or if Mr. Shore terminates his employment with Good Reason, or if the Company terminates his employment without Cause. Under the terms of the Shore Employment Agreement, Mr. Shore has agreed to be bound by certain restrictive covenants that limit his ability to compete or interfere with the Company, including a confidentiality agreement, a non-solicitation agreement, and an agreement not to compete with the Company. Mr. Shore has agreed, during the term of the employment agreement and for a period of three years from the termination of his employment (other than a termination by the Company without Cause or by Mr. Shore for Good Reason), that he will not solicit any employees or clients of the Company or Parent or engage in the business of printing or manufacturing paperboard packaging anywhere in North America. Mr. Shore's letter agreement also includes a provision by which Parent will cause the Company to pay, on the First Purchase Date, a lump sum Severance Payment (as defined in the Company's Employee Severance Plan) of $5,699,475.72 and the Gross-Up Payment (as defined in the Company's Employee Severance Plan), which amounts are the amounts to which he would have been entitled under the Company's Employee Severance Plan if he had terminated his employment in connection with the Merger. In addition, Mr. Shore's letter agreement requires that he repay $2,527,316 in outstanding loans, plus accrued interest, to the Company on the First Purchase Date. Mr. Liebman's employment agreement (the "Liebman Employment Agreement") will supersede Mr. Liebman's existing employment agreement with the Company. The Liebman Employment Agreement provides that Mr. Liebman will serve as the Executive Vice-President of the Company, on a full-time basis, for the period commencing on the First Purchase Date and ending on December 31, 2002. The Liebman Employment Agreement further provides that Mr. Liebman shall receive an annual salary of $350,000 and an annual bonus, not to exceed $215,000, based upon target performance objectives established by a senior officer of Parent. Effective as of the First Purchase Date, Parent shall grant Mr. Liebman a nonqualified stock option to purchase 10,000 shares of Parent common stock at a price per share equal to the fair market value of such stock on the First Purchase Date. Thereafter Mr. Liebman shall be eligible to receive such additional stock option awards as the Board of Directors of Parent may determine. In addition, on the First Purchase Date, Mr. Liebman shall receive that number of shares of common stock of Parent having a fair market value as of the First Purchase Date of $100,000, which shares shall be nontransferable and subject to forfeiture until vested. These restricted shares will vest on December 31, 2002, provided that Mr. Liebman remains employed until that date. Also pursuant to the terms of the Liebman Employment Agreement, for a one-year period following the effective date of the Merger, the Company shall provide Mr. Liebman with benefits substantially comparable in the aggregate to the benefits provided to Mr. Liebman as of the date of the Merger Agreement. Notwithstanding this agreement to extend Mr. Liebman's benefits for one year, the Company has agreed to extend the split-dollar life insurance benefit and the automobile lease allowance and expense reimbursement only until December 31, 2000. The employment agreement provides, however, that the Company will continue to maintain the rabbi trust established for Mr. Liebman's retirement, in accordance with its terms, even after the one-year period. Under the Liebman Employment Agreement, Mr. Liebman is entitled to certain payments upon termination of his employment. If Mr. Liebman's employment is terminated because of his death, or if the Company terminates his employment based on a good faith determination that he has become disabled, the employment agreement shall terminate without further obligations, except that the Company shall pay to Mr. Liebman or his legal representative: unpaid base salary through the date of termination, any unpaid performance bonus for the prior calendar year, any prorated bonus otherwise payable under the Liebman Employment Agreement for the year of termination, and unpaid accrued vacation pay (collectively, the "Liebman Accrued Obligations"). Likewise, if the Company terminates Mr. Liebman's employment for "Cause" (as defined in the Liebman Employment Agreement), the Company need only pay the Liebman Accrued Obligations. If the Company terminates Mr. Liebman's employment other than for Cause or as a result of his death or disability, or if Mr. Liebman terminates his employment with "Good Reason" (as defined in the Liebman Employment Agreement), the Company shall pay to Mr. Liebman: the Liebman Accrued Obligations and severance pay of not more than one year of base salary. In addition, the restricted 32 stock options shall vest immediately and become non-forfeitable, in the event that Mr. Liebman's employment is terminated because of his death or disability, or if Mr. Liebman terminates his employment with Good Reason, or if the Company terminates his employment without Cause. Under the terms of the Liebman Employment Agreement, Mr. Liebman has agreed to be bound by certain restrictive covenants that limit his ability to compete or interfere with the Company, including a confidentiality agreement, a non-solicitation agreement, and an agreement not to compete with the Company. Mr. Liebman has agreed, during the term of the employment agreement and for a period of two years from the termination of his employment (other than a termination by the Company without Cause or by Mr. Liebman for Good Reason), that he will not solicit any employees or clients of the Company or Parent or engage in the business of printing or manufacturing paperboard packaging anywhere in North America. Mr. Liebman's letter agreement also includes a provision by which Parent will cause the Company to pay, on the First Purchase Date, a lump sum Severance Payment (as defined in the Company's Employee Severance Plan) of $1,820,499.00 and the Gross-Up Payment (also as defined in the Company's Employee Severance Plan), which are the amounts he would have been entitled to under the Company's Employee Severance Plan if he had terminated his employment in connection with the Merger. In addition, Mr. Liebman's letter agreement requires that he repay $1,262,521 in outstanding loans, plus accrued interest, to the Company on the First Purchase Date. 12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY. PURPOSE OF THE OFFER AND THE MERGER. The purpose of the Offer and the Merger is for Parent to acquire the entire equity interest in the Company. Through the Offer, Purchaser intends to acquire control of, and a majority equity interest in, the Company. Following the completion of the Offer, Parent intends to acquire any outstanding Shares not owned by Purchaser by consummating the Merger. Under the DGCL the approval of the Board and the affirmative vote of a majority of the holders of outstanding Shares are required to adopt the Merger Agreement. The Board has unanimously approved the transactions contemplated by the Merger Agreement, including the Offer and the Merger, and, unless the Merger is consummated pursuant to the short form merger provisions of the DGCL described below, the only remaining required corporate action necessary to consummate the Merger is the adoption of the Merger Agreement by the affirmative vote of the holders of a majority of the then outstanding Shares. If the Minimum Condition is satisfied, Purchaser will have sufficient voting power to cause the adoption of the Merger Agreement by the requisite vote of stockholders of the Company without the affirmative vote of any other stockholder. Under the DGCL, if Purchaser acquires at least 90% of the outstanding Shares, Purchaser will be able to adopt the Merger Agreement without a vote of the Company's other stockholders. The Merger Agreement provides that if Purchaser, or any other direct or indirect subsidiary of Parent, acquires at least 90% of the outstanding Shares, Parent, Purchaser and the Company will take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the expiration of the Offer without action by the other stockholders of the Company, in accordance with Section 253 of the DGCL. In the event that all of the conditions to Purchaser's obligation to purchase Shares in the Offer is satisfied or waived and the number of Shares tendered is less than 90% of the outstanding Shares on a fully diluted basis, Purchaser will accept for payment all Shares validly tendered, and Purchaser may extend the Offer for the purpose of attempting to reach the 90% threshold required for a short form merger. Under these circumstances, the Offer may be extended for up to twenty (20) business days, and Purchaser will accept for payment and promptly pay for all Shares validly tendered during the extension period. Such an extension will constitute a Subsequent Offering Period. See Section 1. If Purchaser is unable to satisfy the requirements for a short form merger, a significantly longer period of time may be required to effect the Merger, because a vote of the Company's stockholders would be required under the DGCL. PLANS FOR THE COMPANY. Except as otherwise set forth in this Offer to Purchase, it is expected that, initially following the Merger, the business and operations of the Company will be continued by the Surviving Corporation substantially as they are currently being conducted. The directors of Purchaser will be the initial directors of the Surviving Corporation, and the officers of the Company will be the initial officers of the Surviving Corporation. 33 Upon completion of the Offer and the Merger, Parent intends to conduct a detailed review of the Company and its assets, corporate structure, capitalization, operations, policies, management and personnel. After such review, Parent will determine what actions or changes, if any, would be desirable in light of the circumstances which then exist. Except as described in this Offer to Purchase, neither Parent nor Purchaser has any present plans or proposals that would relate to or result in (i) any extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries, (ii) a sale or transfer of a material amount of assets of the Company or any of its subsidiaries, (iii) any change in the Board or management, (iv) any material change in the Company's capitalization or dividend policy, (v) any other material change in the Company's corporate structure or business, (vi) a class of securities of the Company being delisted from a national securities exchange or ceasing to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association or (vii) a class of equity securities of the Company becoming eligible for termination of registration pursuant to Section 12(g) of the Exchange Act. APPRAISAL RIGHTS. No appraisal rights are available in connection with the Offer. However, if the Merger is consummated, stockholders of the Company may have certain rights under the DGCL to dissent, and demand appraisal of, and to obtain payment for the fair value of their Shares. Such rights, if the statutory procedures are complied with, could lead to a judicial determination of the fair value of the Shares (excluding any element of value arising from the accomplishment or expectation of the Merger) required to be paid in cash to such dissenting stockholders for their Shares. In addition, such dissenting stockholders would be entitled to receive payment of a fair rate of interest from the date of consummation of the Merger on the amount determined to be the fair value of their Shares. In determining the fair value of the Shares, a Delaware court would be required to take into account all relevant factors. Accordingly, such determination could be based upon considerations other than, or in addition to, the market value of the Shares, including, among other things, asset value and earning capacity. In WEINBERGER V. UOP, INC., the Delaware Supreme Court stated, among other things, that "proof of value by any techniques or methods which are generally considered acceptable in the financial community and otherwise admissible in court" should be considered in an appraisal proceeding. Therefore, the value so determined in any appraisal proceeding could be higher or lower than the Offer Price. 13. CERTAIN EFFECTS OF THE OFFER. EFFECT ON THE MARKET FOR THE SHARES. The purchase of Shares pursuant to the Offer will reduce the number of holders of Shares and the number of Shares that might otherwise trade publicly. Consequently, depending upon the number of Shares purchased and the number of remaining holders of Shares, the purchase of Shares pursuant to the Offer may adversely affect the liquidity and market value of the remaining Shares held by the public. Purchaser cannot predict whether the reduction in the number of Shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for, or marketability of, the Shares or whether it would cause future market prices to be greater or less than the Offer Price. STOCK QUOTATIONS. The Shares are currently listed and traded on the NYSE, which constitutes the principal trading market for the Shares. Depending upon the aggregate market value and the number of Shares not purchased pursuant to the Offer, the Shares may no longer meet the standards for continued listing on the NYSE. According to its published guidelines, the NYSE would give consideration to delisting the Shares if, among other things, the number of publicly held Shares falls below 600,000, the number of holders of round lots of Shares falls below 400 (or below 1,200 if the average monthly trading volume is below 100,000 for the last twelve months) or the aggregate market value of such publicly held Shares falls below $8,000,000. Shares held by officers or directors of the Company or their immediate families, or by any beneficial owner of more than 10% or more of the Shares, ordinarily will not be considered as being publicly held for this purpose. If, as a result of the purchase of Shares pursuant to the Offer, the Shares no longer meet the requirements for continued listing on the NYSE, the market for the Shares could be adversely affected. In the event the Shares are no longer eligible for listing on the NYSE, quotations might still be available from other sources. The extent of the 34 public market for the Shares and the availability of such quotations would, however, depend upon the number of holders of such Shares at such time, the interest in maintaining a market in such Shares on the part of securities firms, the possible termination of registration of such Shares under the Exchange Act as described below and other factors. EXCHANGE ACT REGISTRATION. The Shares are currently registered under the Exchange Act. Such registration may be terminated upon application of the Company to the SEC if such Shares are not listed on a national securities exchange and there are fewer than 300 holders of record of the Shares. The termination of the registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to its stockholders and to the SEC, and would make certain of the provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b) and the requirement of furnishing a proxy statement in connection with stockholders meetings and the related requirement of an annual report to stockholders, and the requirements of Rule 13e-3 with respect to going private transactions, no longer applicable with respect to the Shares or to the Company. Furthermore, if registration of the Shares under the Exchange Act were terminated, the ability of "affiliates" of the Company and persons holding "restricted securities" of the Company to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended, may be impaired or, with respect to certain persons, eliminated. If the Shares were no longer registered under the Exchange Act, the Shares would no longer be eligible for NYSE listing. Parent and Purchaser intend to cause the Company to make an application for termination of registration of the Shares as soon as possible after consummation of the Offer if the Shares are then eligible for such termination. MARGIN SECURITIES. The Shares are currently "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on such Shares as collateral. Depending on factors similar to those described above regarding listing and market quotations, it is possible the Shares would no longer constitute "margin securities" for purposes of the Federal Reserve Board's margin regulations and therefore could no longer be used as collateral for loans made by brokers. If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities." 14. DIVIDENDS AND DISTRIBUTIONS. As discussed in Section 11, pursuant to the Merger Agreement, without the prior approval of Parent or as otherwise contemplated in the Merger Agreement, the Company has agreed to not (i) declare, set aside, make or pay any dividend or other distribution in respect of any of its capital stock, except that a wholly owned subsidiary of the Company may declare and pay a dividend to its parent, (ii) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock or (iii) except as required by the terms of any security as in effect on the date of the Merger Agreement or expressly permitted under the Merger Agreement, amend the terms or change the period of exercisability of, purchase, repurchase, redeem or otherwise acquire, or permit any subsidiary to amend the terms or change the period of exercisability of, purchase, repurchase, redeem or otherwise acquire, any of its securities or any securities of its subsidiaries, including, without limitation, shares of Common Stock or any option, warrant or right, directly or indirectly, to acquire any such securities, or propose to do any of the foregoing. 15. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of the Offer, Purchaser will not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) promulgated under the Exchange Act, pay for, and (subject to any such rules or regulations) may delay the acceptance for payment of or the payment for any tendered Shares and (except as provided in the Agreement) amend or terminate the Offer if: (1) the Minimum Condition has not been satisfied prior to the expiration of the Offer; 35 (2) any applicable waiting period under the HSR Act, the Competition Act, the Investment Canada Act or any similar legal regime in any other country applicable to significant operations of Parent or any of its subsidiaries or the Company or any of its subsidiaries has not expired or been terminated prior to the expiration of the Offer; or (3) at any time on or after the date of the Merger Agreement and before the expiration of the Offer, any of the following conditions exists: (a) there shall be in effect an injunction or other order, decree, judgment or ruling by a governmental entity of competent jurisdiction or a law, rule or regulation shall have been promulgated or enacted by a governmental entity of competent jurisdiction which in any such case (i) restrains or prohibits the making or consummation of the Offer or the consummation of the Merger, or (ii) prohibits or restricts the ownership or operation by Parent (or any of its affiliates or subsidiaries) of any portion of the Company's business or assets or which would substantially deprive Parent and/or its affiliates or subsidiaries of the benefit of ownership of the Company's business or assets, or compels Parent (or any of its affiliates or subsidiaries) to dispose of or hold separate any portion of the Company's business or assets, or of its business or assets, or which would substantially deprive Parent and/or its affiliates or subsidiaries of the benefit of ownership of the Company's business or assets, or (iii) imposes material limitations on the ability of Purchaser or Parent effectively to acquire or to hold or to exercise full rights of ownership of the shares of Common Stock, including, without limitation, the right to vote shares of Common Stock purchased by Purchaser pursuant to the Offer or acquired by Parent in the Merger on all matters properly presented to the stockholders of the Company, or (iv) imposes any material limitations on the ability of Parent and/or its affiliates or subsidiaries effectively to control in any material respect the business and operations of the Company (other than, prior to the Effective Time, by reason of there being minority stockholders in the Company); or (b) there shall have been instituted, pending or threatened (in writing or by public announcement) an action by a governmental entity seeking (i) to restrain or prohibit the making or consummation of the Offer or the consummation of the Merger or (ii) to impose any other restriction, prohibition or limitation referred to in the foregoing paragraph (a); or (c) the Merger Agreement shall have been terminated by the Company or Parent in accordance with its terms; or (d) Parent and the Company shall have agreed in writing that Purchaser shall amend the Offer to terminate the Offer or postpone the payment for shares of Common Stock pursuant thereto; or (e) the representations and warranties of the Company set forth in the Agreement shall not be true and accurate in all respects as of the date of consummation of the Offer as though made on or as of such date (except for those representations and warranties that address matters only as of a particular date or only with respect to a specific period of time which need only be true and accurate as of such date or with respect to such period) (in each case without for this purpose giving effect to qualifications or limitations as to materiality or the absence of a Company Material Adverse Effect contained in such representations and warranties, but reading each such representation and warranty as though the Company Disclosure Letter included information plainly disclosed in the Company's SEC filings filed subsequent to May 2, 1999 and prior to February 16, 2000), except for such failures to be true and correct as could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, or the Company shall have breached or failed to perform or comply in any material respect with any obligation, agreement or covenant required by the Merger Agreement to be performed or complied with by it; PROVIDED, HOWEVER, that such breach or failure to perform is incapable of being cured or has not been cured prior to the initial Expiration Date (or such later date upon which the Offer shall expire); or 36 (f) the Company or Purchaser shall have failed to receive any or all governmental or third party consents and approvals to consummate the Offer which, if not received, would have a Company Material Adverse Effect; or (g) the Board shall have modified or amended its recommendation of the Offer in any manner adverse to Parent or shall have withdrawn its recommendation of the Offer, or shall have recommended acceptance of any Acquisition Proposal or shall have resolved to do any of the foregoing; or (h) (i) any corporation, entity or "group" (as defined in Section 13(d)(3) of the Exchange Act) ("person/group"), other than Parent and Purchaser shall have acquired beneficial ownership of more than 21% of the outstanding shares of Common Stock, or shall have been granted any options or rights, conditional or otherwise, to acquire a total of more than 21% of the outstanding shares of Common Stock and which, in each case, does not tender the shares of Common Stock beneficially owned by it in the Offer; (ii) any new group shall have been formed which beneficially owns more than 15% of the outstanding shares of Common Stock and which does not tender the shares of Common Stock beneficially owned by it in the Offer; or (iii) any person/group (other than Parent or one or more of its affiliates) shall have entered into an agreement in principle or definitive agreement with the Company with respect to a tender or exchange offer for any shares of Common Stock or a merger, consolidation or other business combination with or involving the Company; or (i) any change, development, effect or circumstance shall have occurred or be threatened that is reasonably likely to be a Company Material Adverse Effect; or (j) the Rights shall have become exercisable; which in the reasonable judgment of Parent or the Purchaser, in any such case, and regardless of the circumstances giving rise to such condition, makes it inadvisable to proceed with the Offer and/or with such acceptance for payment or payments. The foregoing conditions are for the sole benefit of Parent and Purchaser and may be asserted by Parent and Purchaser regardless of the circumstances giving rise to any such condition, and, subject to the terms of the Merger Agreement, may be waived by Parent and Purchaser, in whole or in part, at any time and from time to time, in the sole discretion of Parent and Purchaser. The failure by Parent and Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any right, the waiver of such right with respect to any particular facts or circumstances shall not be deemed a waiver with respect to any other facts or circumstances, and each right shall be deemed an ongoing right which may be asserted at any time and from time to time. Should the Offer be terminated pursuant to the foregoing provisions, all tendered Shares not theretofore accepted for payment pursuant thereto shall forthwith be returned to the tendering stockholders. 16. CERTAIN LEGAL MATTERS. GENERAL. Except as described in this Section 16, based on a review of publicly available filings by the Company with the SEC and other publicly available information concerning the Company, Purchaser is not aware of any license or regulatory permit that appears to be material to the business of the Company and that might be adversely affected by Purchaser's acquisition of Shares pursuant to the Offer, or of any approval or other action by any governmental, administrative or regulatory agency or authority, domestic or foreign, that would be required for the acquisition or ownership of Shares by Purchaser pursuant to the Offer. Should any such approval or other action be required, it is presently contemplated that such approval or action would be sought, except as described below under "--State Takeover Laws." While Purchaser does not currently intend to delay acceptance for payment of Shares tendered pursuant to the Offer pending the outcome of any such matter, there can be no assurance that any such approval or other action, if required, would be obtained without substantial conditions or that adverse consequences would not result to the Company's business or that certain parts of the Company's business would not have to be disposed of in the event that such approvals were not obtained or such other actions were not taken or in 37 order to obtain any such approval or other action. If certain types of adverse action are taken with respect to the matters discussed below, Purchaser may decline to accept for payment or pay for any Shares tendered. See Section 15. STATE TAKEOVER LAWS. The Company and certain of its subsidiaries conduct business in a number of states throughout the United States, some of which have adopted laws and regulations applicable to offers to acquire shares of corporations that are incorporated or have substantial assets, stockholders and/or a principal place of business in such states. In EDGAR V. MITE CORP., the Supreme Court of the United States held that the Illinois Business Takeover Statute, which involved state securities laws that made the takeover of certain corporations more difficult, imposed a substantial burden on interstate commerce and was therefore unconstitutional. In CTS CORP. V. DYNAMICS CORP. OF AMERICA, however, the Supreme Court of the United States held that a state may, as a matter of corporate law and, in particular, those laws concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without prior approval of the remaining stockholders, PROVIDED that such laws were applicable only under certain conditions, in particular, that the corporation has a substantial number of stockholders in and is incorporated under the laws of such state. Subsequently, in TLX ACQUISITION CORP. V. TELEX CORP., a federal district court in Oklahoma ruled that the Oklahoma statutes were unconstitutional insofar as they applied to corporations incorporated outside Oklahoma in that they would subject such corporations to inconsistent regulations. Similarly, in TYSON FOODS, INC. V. MCREYNOLDS, a federal district court in Tennessee ruled that four Tennessee takeover statutes were unconstitutional as applied to corporations incorporated outside Tennessee. This decision was affirmed by the United States Court of Appeals for the Sixth Circuit. The Company is incorporated under the laws of the State of Delaware. In general, Section 203 of the DGCL ("Section 203") prevents an "interested stockholder" (including a person who owns or has the right to acquire 15% or more of the corporation's outstanding voting stock) from engaging in a "business combination" (defined to include mergers and certain other actions) with a Delaware corporation for a period of three years following the date such person became an interested stockholder. The Board has taken all appropriate action so that neither Parent nor Purchaser is or will be considered an "interested stockholder" pursuant to Section 203. Neither Parent nor Purchaser has determined whether any other state takeover laws and regulations will by their terms apply to the Offer or the Merger, and, except as set forth above, neither Parent nor Purchaser has presently sought to comply with any state takeover statute or regulation. Parent and Purchaser reserve the right to challenge the applicability or validity of any state law or regulation purporting to apply to the Offer or the Merger, and neither anything in this Offer to Purchase nor any action taken in connection herewith is intended as a waiver of such right. In the event it is asserted that one or more state takeover statutes is applicable to the Offer or the Merger and an appropriate court does not determine that such statute is inapplicable or invalid as applied to the Offer or the Merger, Parent or Purchaser might be required to file certain information with, or to receive approval from, the relevant state authorities, and Purchaser might be unable to accept for payment or pay for Shares tendered pursuant to the Offer, or be delayed in consummating the Offer. ANTITRUST. Under the HSR Act and the rules that have been promulgated thereunder by the Federal Trade Commission (the "FTC"), certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division of the Department of Justice (the "Antitrust Division") and the FTC and certain waiting period requirements have been satisfied. The purchase of Shares pursuant to the Offer is subject to such requirements. Pursuant to the requirements of the HSR Act, Purchaser filed a Notification and Report Form with respect to the Offer and Merger with the Antitrust Division and the FTC on February 22, 2000. As a result, the waiting period applicable to the purchase of Shares pursuant to the Offer is scheduled to expire at 11:59 p.m., New York City time, fifteen (15) days after such filing. However, prior to such time, the Antitrust Division or the FTC may extend the waiting period by requesting additional information or documentary material relevant to the Offer from Purchaser. If such a request is made, the waiting period will be extended until 11:59 p.m., New York City time, on the tenth day after substantial compliance by Purchaser with such request. Thereafter, such waiting period can be extended only by court order. 38 A request is being made pursuant to the HSR Act for early termination of the waiting period applicable to the Offer. There can be no assurance, however, that the applicable 15-day HSR Act waiting period will be terminated early. Shares will not be accepted for payment or paid for pursuant to the Offer until the expiration or early termination of the applicable waiting period under the HSR Act. See Section 15. Any extension of the waiting period will not give rise to any withdrawal rights not otherwise provided for by applicable law. See Section 3. If Purchaser's acquisition of Shares is delayed pursuant to a request by the Antitrust Division or the FTC for additional information or documentary material pursuant to the HSR Act, the Offer will be extended in certain circumstances. See Section 1. The Antitrust Division and the FTC scrutinize the legality under the antitrust laws of transactions such as the acquisition of Shares by Purchaser pursuant to the Offer. At any time before or after the consummation of any such transactions, the Antitrust Division or the FTC could take such action under the antitrust laws of the United States as it deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Shares pursuant to the Offer or seeking divestiture of the Shares so acquired or divestiture of substantial assets of Parent or the Company. Private parties (including individual States) may also bring legal actions under the antitrust laws of the United States. Purchaser does not believe that the consummation of the Offer will result in a violation of any applicable antitrust laws. However, there can be no assurance that a challenge to the Offer on antitrust grounds will not be made, or if such a challenge is made, what the result will be. See Section 15 for certain conditions to the Offer, including conditions with respect to certain governmental actions and Section 11 for certain termination rights. COMPETITION ACT. The merger provisions of the Competition Act permit the Commissioner of Competition appointed thereunder (the "Commissioner"), to apply to the Competition Tribunal (the "Tribunal") to seek relief in respect of a merger which prevents or lessens, or is likely to prevent or lessen, competition substantially. The relief that may be ordered by the Tribunal includes, in the case of a completed merger, ordering a dissolution of the merger or a disposition of assets or shares, and in the case of a proposed merger, prohibiting completion of the transaction. The Competition Act also requires parties to certain proposed mergers which exceed specified size thresholds to provide the Commissioner with prior notice of and information relating to the transaction and the parties thereto, and to await the expiration of the prescribed waiting period, prior to completing the transaction. In lieu of, or in addition to, filing a prescribed notification form, which can be either short-form or long-form, and awaiting the expiration of the prescribed waiting period, a party to a proposed merger may apply to the Commissioner for an advance ruling certificate ("ARC") or some other form of comfort letter, which may be issued by the Commissioner if he is satisfied he would not have sufficient grounds on which to apply to the Tribunal for an order under the merger provisions in respect of the transaction. Purchaser will be filing a short-form pre-merger notification with the Commissioner and applying for an ARC or some other form of comfort letter, as deemed appropriate. INVESTMENT CANADA ACT. The Investment Canada Act is Canada's statute of general application governing the acquisition of control of Canadian businesses by non-Canadians. An investment governed by the Investment Canada Act is either notifiable or reviewable. A notifiable investment is simply one for which the acquiror must provide a two-page notice to the Investment Review Division of Industry Canada ("Investment Canada") at any time prior to the closing of the investment or within thirty (30) days thereafter. A reviewable investment is one for which the acquiror must submit an application for review with prescribed information to Investment Canada. With certain limited exceptions relating to the type of business carried on by the target company, an acquisition of a Canadian business by a non-Canadian that qualifies as a "WTO investor" for purposes of the Act is reviewable if the value of the assets acquired is equal to or greater than Cdn $184 million as set forth in the audited financial statements of the target company for its most recently completed fiscal period. Before a reviewable investment may be completed, the Minister of the federal Cabinet responsible for Investment Canada must determine that the investment is likely to be of "net benefit to Canada." 39 The Minister has an initial 45-day period to make his determination from the date of receipt by the Investment Review Division of a completed application for review. The Minister may, at his discretion, extend this initial 45-day period for a further thirty (30) days by giving notice to the prospective acquiror. Any further extensions require the consent of the acquiror. If at the end of the 75-day period the Minister is not satisfied that the investment is likely to be of net benefit to Canada, he must send a notice to that effect to the prospective acquiror, and the acquiror has thirty (30) days to make representations and submit undertakings to the Minister in an attempt to change his decision. Purchaser does not believe that an application for review will be necessary and believes that all that will be required is the filing of a notice thirty (30) days following the closing of the investment. OTHER FILINGS. There is a possibility that filings may have to be made with other foreign governments under their pre-merger notification statutes. The filing requirements of various nations are being analyzed by the parties and, where necessary, such filings will be made. 17. FEES AND EXPENSES. Credit Suisse First Boston is acting as the Dealer Manager in connection with the Offer. Credit Suisse First Boston will receive reasonable and customary compensation for its services relating to the Offer and will be reimbursed for certain out-of-pocket expenses including reasonable expenses of counsel and other advisors. Parent and Purchaser have agreed to indemnify Credit Suisse First Boston and certain related persons against certain liabilities and expenses in connection with its engagement, including certain liabilities under the federal securities laws. Credit Suisse First Boston and its affiliates may actively trade the debt and equity securities of the Company for their own account and for the account of customers and, accordingly, may at any time hold a long or short position in such securities. Parent and Purchaser have retained Georgeson Shareholder Communications Inc. to be the Information Agent and ChaseMellon Shareholder Services, L.L.C. to be the Depositary in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, telecopy, telegraph and personal interview and may request banks, brokers, dealers and other nominees to forward materials relating to the Offer to beneficial owners of Shares. The Information Agent and the Depositary each will receive reasonable and customary compensation for their respective services in connection with the Offer, will be reimbursed for reasonable out-of-pocket expenses, and will be indemnified against certain liabilities and expenses in connection therewith, including certain liabilities under federal securities laws. None of Parent or Purchaser will pay any fees or commissions to any broker or dealer or to any other person (other than to the Dealer Manager, the Depositary and the Information Agent) in connection with the solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust companies will, upon request, be reimbursed by Purchaser for customary mailing and handling expenses incurred by them in forwarding offering materials to their customers. 18. MISCELLANEOUS. The Offer is being made to all holders of Shares. Purchaser is not aware of any jurisdiction where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good faith effort to comply with any such state statute or seek to have such statute declared inapplicable to the Offer. If, after such good faith effort, Purchaser cannot comply with any such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer will be deemed to be made on behalf of Purchaser by one or more registered brokers or dealers licensed under the laws of such jurisdiction. 40 NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF PARENT OR PURCHASER NOT CONTAINED IN THIS OFFER TO PURCHASE OR IN THE RELATED LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. Parent and Purchaser have filed with the SEC a Tender Offer Statement on Schedule TO, together with all exhibits thereto, pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act (the "Exchange Act Rules"), furnishing certain additional information with respect to the Offer. In addition, the Company has filed a Solicitation/Recommendation Statement on Schedule 14D-9, together with all exhibits thereto, pursuant to Rule 14d-9 of the Exchange Act Rules setting forth its recommendation with respect to the Offer and the reasons for such recommendations and furnishing certain additional related information. Such Schedules and any amendments thereto, including exhibits, may be inspected and copies may be obtained from the offices of the SEC in the manner set forth in Section 7 (except that they will not be available at the regional offices of the SEC). International Paper-37, Inc. February 29, 2000 41 SCHEDULE I INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND PURCHASER 1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. Set forth in the table below are the name and the present principal occupations or employment and the name, principal business and address of any corporation or other organization in which such occupation or employment is conducted, and the five-year employment history of each of the directors and executive officers of Parent. Each person identified below is a United States citizen. The principal business address of Parent and, unless otherwise indicated, the business address of each person identified below is Two Manhattanville Road, Purchase, New York 10577.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS - ---- ------------------------------------------------------------ Samir G. Gibara Director since March 9, 1999. Chairman of the board, chief The Goodyear Tire & Rubber executive officer and president of The Goodyear Tire & Company Rubber Company since 1996. Prior to that time he served in 1144 East Market Street various managerial posts and became vice president of Akron, OH 44316-0001 finance and chief financial officer in 1992. He was elected president and chief operating officer in 1995. He is a member of The Business Roundtable. James A. Henderson Director since February 1, 1999. Chairman and chief 301 Washington Avenue executive officer of Cummins Engine Company, Inc. until P.O. Box 808 December 1999. He had been in that position since 1995. He Columbus, IN 47202 is a director of SBC Communications Inc., Rohm and Haas Company, Ryerson Tull, Inc. and Landmark Communications, Inc. He is also a member of The Business Roundtable and The Business Council. Jane C. Pfeiffer Director since June 14, 1977. Management consultant. She is 1050 Beach Road a director of Ashland, Inc., J.C. Penney Company, Inc., and Johns Island The MONY Group. She is a trustee of The Conference Board, Vero Beach, FL 32963 the University of Notre Dame and the Overseas Development Council and a member of The Council on Foreign Relations. Jeremiah J. Sheehan Director since May 4, 1999. Chairman of the board and chief Reynolds Metals Company executive officer of Reynolds Metals Company since 1996. 6601 West Broad Street Prior to that he was president and chief operating officer Richmond, VA 23230 from 1994 until 1996. He is a director of Reynolds Metals Company, Federal Reserve Bank of Richmond and Universal Corporation. C. Wesley Smith Director since December 12, 1995. Executive vice International Paper Company president-operating group of International Paper since 1998. 6400 Poplar Avenue Prior thereto, he was executive vice president-printing Memphis, TN 38197 papers from 1992. W. Craig McClelland Director since May 4, 1999. Former chairman of the board and 50 Tice Boulevard chief executive officer of Union Camp Corporation until Woodcliff Lake, NJ 07675 April 1999. Previously he served as president and chief operating officer from 1989 to 1994. He is a director of Allegheny Teledyne, Inc., WaterPik Technologies, Inc. and PNC Financial Corporation and serves as co-chairman of the Global Advisory Council an affiliate of The Conference Board. Robert D. Kennedy Director since May 4, 1999. Former chairman of the board and UCAR International Inc. chief executive officer of Union Carbide Corporation from 39 Old Ridgebury Road 1986 to 1995. He was retired from 1995 until March 1998. Section J-4 From March 1998 until September 1999, he was chairman of UCAR International Inc. He is on the board of Union Carbide
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS - ---- ------------------------------------------------------------ Danbury, CT 06817-0001 Corporation, Kmart Corporation, LionOre Mining International Ltd., Sunoco Inc., UCAR International Inc. and Chase Industries. He is also on the Advisory Board of The Blackstone Group and RFE Investment Partners. Peter I. Bijur Director since July 8, 1997. Chairman and chief executive Texaco Inc. officer of Texaco Inc. He joined Texaco in 1966 and was 2000 Westchester Avenue elected senior vice president in May of 1992. He became vice White Plains, NY 10650 chairman of the board in January 1996, and was elected to his current position in July 1996. He is also chairman of the American Petroleum Institute, a member of The Business Council, the Business Council of New York State, Inc., The Business Roundtable, the National Petroleum Council, and the Council on Foreign Relations and serves on the Board of Trustees of The Conference Board. John T. Dillon Director since March 1, 1991. Chairman of the board and chief executive officer of International Paper since 1996. Prior thereto he was president and chief operating officer in 1995. He is also a director of Caterpillar Inc. He is chairman of the board of The National Council on Economic Education and a member of The Business Roundtable. John R. Kennedy Director since March 12, 1996. Retired president and chief JRK Financial Corporation executive officer of Federal Paper Board Company, Inc. from 125 Elm Street 1975 to 1996. He is a director of DeVlieg Bullard, Inc., New Canaan, CT 06840 Chase Brass Industries, Inc., Holnam, Inc., Pioneer Companies, Inc., Spartech Corporation and Modis Professional Services. He is director and chairman of the board of Georgetown University, on the board of governors of the United Nations Association of the United States of America, and one of the directors for the Foreign Policy Association. Robert J. Eaton Director since January 10, 1995. Chairman of the board of DaimlerChrysler AG management of DaimlerChrysler AG from 1999 through present, 1000 Chrysler Drive and chairman of Chrysler from 1993 to 1998. He is a fellow Auburn Hills, MI 48326-2766 of both the Society of Automotive Engineers and the Engineering Society of Detroit and chairman of the National Academy of Engineering. He is a member of The Business Roundtable and the Business Council. Donald F. McHenry Director since April 14, 1981. Distinguished Professor of The IRC Group LLC Diplomacy at Georgetown University since 1981. He is 1320 19th Street, N.W. president of the IRC Group LLC and a director of AT&T, The Suite 410 Coca-Cola Company, Fleet Boston Financial, the First Washington, DC 20016 National Bank of Boston, SmithKline Beecham plc, and the Institute for International Economics. He is a trustee of Columbia University and chairman of the board of Africare. Patrick F. Noonan Director since December 14, 1993. Chairman of the board of The Conservation Fund The Conservation Fund (a nonprofit organization dedicated to Suite 1120 conserving America's land and water resources) and 1800 North Kent Street previously, also its chief executive officer since 1985. Arlington, VA 22209 Prior thereto he was president of The Nature Conservancy. He is a trustee of The National Geographic Society. He is also a director of Ashland, Inc., the Fund for Government Investors, Saul Centers REIT, and the American Gas Association Index Fund. He is a member of the Board of Visitors of Duke University School of the Environment.
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS - ---- ------------------------------------------------------------ Charles R. Shoemate Director since November 1, 1994. Chairman, president and Bestfoods chief executive officer of Bestfoods. He was elected International Plaza president and a member of its board of directors in 1988, 700 Sylvan Avenue chief executive officer in August 1990, and chairman in P.O. Box 8000 September 1990. He is a director of CIGNA Corporation, Englewood Cliffs, NJ 07632 Texaco, Inc., and the Grocery Manufacturers of America, Inc. He is a member of the Business Roundtable and chairman of The Conference Board. James P. Melican Executive vice president-legal and external affairs. He assumed his current position in 1991. David W. Oskin Executive vice president-consumer packaging since 1995, and was CEO and managing director of Carter Holt Harvey Limited of New Zealand from 1992 to 1995. Marianne M. Parrs Executive vice president-administration since March 9, 1999. Prior thereto she was executive vice president and chief financial officer from 1995 to 1999. She was staff vice president-tax from 1993 to 1995. Andrew R. Lessin Vice president and controller since 1995. Prior thereto he was the controller from 1990. William B. Lytton Senior vice president and general counsel since January 1999. Prior thereto he was vice president and general counsel since 1996, and vice president and general counsel for Lockheed Martin Electronics from 1995 to 1996. John V. Faraci Senior vice president and chief financial officer since 1999. Prior thereto he was chief executive officer and managing director of Carter Holt Harvey since 1995.
2. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. Set forth in the table below are the name and the present principal occupations or employment and the name, principal business and address of any corporation or other organization in which such occupation or employment is conducted, and the five-year employment history of each of the directors and executive officers of Purchaser. Each person identified below is a United States citizen. The principal business address of Purchaser and, unless otherwise indicated, the business address of each person identified below is Two Manhattanville Road, Purchase, New York 10577.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND NAME MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS - ---- ------------------------------------------------------------ James W. Guedry Director and president of International Paper-37, Inc. since August 3, 1999. Vice president, secretary and associate general counsel of International Paper Company since 1993. Barbara T. Batten Director of International Paper-37, Inc. since August 3, 1999. Assistant secretary of International Paper Company since June 8, 1999. Prior to that she was a legal assistant and paralegal with Union Camp Corporation. Julius A. Weiss Treasurer of International Paper-37, Inc. since August 3, 1999. Assistant treasurer of International Paper Company from January 1998 to the present. Previously at International Paper Company he served as senior controller-forest products and industrial packaging from January 1996 through August 1998, and sector controller of specialty, imaging and distribution from October 1993 through December 1995.
I-3 Manually signed facsimile copies of the Letter of Transmittal will be accepted. Letters of Transmittal and certificates for Shares should be sent or delivered by each stockholder of the Company or his broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of its addresses set forth below: THE DEPOSITARY FOR THE OFFER IS: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND: ChaseMellon Shareholder Services, (FOR ELIGIBLE INSTITUTIONS ONLY) ChaseMellon Shareholder Services, L.L.C. (201) 296-4293 L.L.C. P.O. Box 3301 120 Broadway, 13th Floor South Hackensack, NJ 07606 CONFIRM FACSIMILE BY TELEPHONE: New York, NY 10271 (201) 296-4860 (FOR CONFIRMATION ONLY) BY OVERNIGHT COURIER: ChaseMellon Shareholder Services, L.L.C. 85 Challenger Road Ridgefield Park, NJ 07660
Any questions or requests for assistance may be directed to the Information Agent at its address and telephone numbers set forth below. Requests for additional copies of this Offer to Purchase and the Letter of Transmittal may be directed to the Information Agent or the Depositary. Stockholders may also contact their brokers, dealers, commercial banks, trust companies or other nominees for assistance concerning the Offer. THE INFORMATION AGENT FOR THE OFFER IS: Georgeson Shareholder Communications Inc. 17 State Street, 10th Floor New York, NY 10004 Banks and Brokers Call Collect: (212) 440-9800 All Others Call Toll Free: (800) 223-2064 THE DEALER MANAGER FOR THE OFFER IS: CREDIT SUISSE FIRST BOSTON CORPORATION Eleven Madison Avenue New York, NY 10010-3629 Call Toll Free: (800) 881-8320 EX-99.(A)(1)(B) 3 LETTER OF TRANSMITTAL Letter of Transmittal to Tender Shares of Common Stock (Including the Associated Rights to Purchase Preferred Stock) of SHOREWOOD PACKAGING CORPORATION Pursuant to the Offer to Purchase dated February 29, 2000 by INTERNATIONAL PAPER-37, INC. a wholly owned subsidiary of INTERNATIONAL PAPER COMPANY THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, MARCH 27, 2000, UNLESS THE OFFER IS EXTENDED. THE DEPOSITARY FOR THE OFFER IS: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND: ChaseMellon Shareholder (FOR ELIGIBLE INSTITUTIONS ONLY) ChaseMellon Shareholder Services, L.L.C. (201) 296-4293 Services, L.L.C. P.O. Box 3301 CONFIRM FACSIMILE BY TELEPHONE: 120 Broadway, 13(th) Floor South Hackensack, NJ 07606 (201) 296-4860 New York, NY 10271 (FOR CONFIRMATION ONLY) BY OVERNIGHT COURIER: ChaseMellon Shareholder Services, L.L.C. 85 Challenger Road Ridgefield Park, NJ 07660
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSIONS OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE THEREFOR PROVIDED BELOW AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
DESCRIPTION OF SHARES TENDERED NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) SHARE CERTIFICATE(S) AND SHARE(S) TENDERED (PLEASE FILL IN EXACTLY AS NAME(S) APPEARS ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY) SHARES REPRESENTED NUMBER OF SHARE CERTIFICATE BY SHARE SHARES NUMBER(S) * CERTIFICATE(S) * TENDERED** ---------------------------------------- ---------------------------------------- ---------------------------------------- ---------------------------------------- TOTAL SHARES - ----------------------------------------------------------------------------------------------------------------------- *NEED NOT BE COMPLETED BY STOCKHOLDERS TENDERING BY BOOK-ENTRY TRANSFER. **UNLESS OTHERWISE INDICATED, ALL SHARES REPRESENTED BY CERTIFICATES DELIVERED TO THE DEPOSITARY WILL BE DEEMED TO HAVE BEEN TENDERED. SEE INSTRUCTION 4. / /CHECK HERE IF CERTIFICATES HAVE BEEN LOST, DESTROYED OR STOLEN. SEE INSTRUCTION 8. - -----------------------------------------------------------------------------------------------------------------------
This Letter of Transmittal is to be completed by stockholders either if certificates representing Shares (as defined below) are to be forwarded herewith or, unless an Agent's Message (as defined in Instruction 2) is utilized, if delivery is to be made by book-entry transfer to the account maintained by the Depositary at The Depository Trust Company ("DTC") pursuant to the procedures set forth in Section 2 of the Offer to Purchase dated February 29, 2000 (the "Offer to Purchase"). Stockholders whose certificates are not immediately available, or who cannot deliver their certificates or confirmation of the book-entry transfer of their Shares into the Depositary's account at DTC ("Book-Entry Confirmation") and all other documents required hereby to the Depositary on or prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase), must tender their Shares according to the guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. / / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY AT DTC AND COMPLETE THE FOLLOWING: Name of Tendering Institution _____________________________________________ Account Number _________________ Transaction Code Number _________________ / / CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holders(s): __________________________________________ Window Ticket Number (if any): _____________________________________________ Date of Execution of Notice of Guaranteed Delivery: ________________________ Name of Institution that Guaranteed Delivery: ______________________________ 2 NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to International Paper-37, Inc., a Delaware corporation ("Purchaser") and a wholly owned subsidiary of International Paper Company, a New York corporation ("Parent"), the above-described shares of common stock, par value $.01 per share, including the associated rights to purchase shares of preferred stock (collectively, the "Shares"), of Shorewood Packaging Corporation (the "Company"), pursuant to Purchaser's offer to purchase all of the outstanding Shares at a price of $21.00 per Share, net to the tendering stockholder in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated February 29, 2000 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which, including any amendments or supplements thereto collectively constitute the "Offer"). Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its affiliates or subsidiaries, the right to purchase Shares tendered pursuant to the Offer. Subject to, and effective upon, acceptance for payment of and payment for the Shares tendered herewith in accordance with the terms and subject to the conditions of the Offer, the undersigned hereby sells, assigns, and transfers to, or upon the order of, Purchaser all right, title and interest in, to and under all of the Shares that are being tendered hereby (and any and all other Shares or other securities or rights issued or issuable in respect thereof on or after February 29, 2000) and irrevocably appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares (and any such other Shares or securities or rights), with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (a) deliver certificates representing such Shares (and any such other Shares or securities or rights), or transfer ownership of such Shares (and any such other Shares or securities or rights) on the account books maintained by DTC, together in either such case with all accompanying evidences of transfer and authenticity, to or upon the order of Purchaser upon receipt by the Depositary, as the undersigned's agent, of the purchase price (adjusted, if appropriate, as provided in the Offer to Purchase), (b) present such Shares (and any such other Shares or securities or rights) for registration and transfer on the books of the Company, and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and any such other Shares or securities or rights), all in accordance with the terms of the Offer. The undersigned hereby irrevocably appoints James W. Guedry, Julius A. Weiss and any other designee of Purchaser, the attorneys-in-fact and proxies of the undersigned, each with full power of substitution and resubstitution, to vote in such manner as each such attorney-in-fact and proxy or his substitute shall, in his sole discretion, deem proper, and otherwise act (including pursuant to written consent) with respect to all the Shares tendered hereby which have been accepted for payment by Purchaser prior to the time of such vote or action (and any and all other Shares or securities or rights issued or issuable in respect thereof on or after February 29, 2000), which the undersigned is entitled to vote at any meeting of stockholders (whether annual or special and whether or not an adjourned meeting) of the Company, or by consent in lieu of any such meeting, or otherwise. This proxy and power of attorney is coupled with an interest in the Shares tendered hereby, is irrevocable, is granted in consideration of, and is effective upon, the acceptance for payment of such Shares (and any such other Shares or securities or rights) by Purchaser in accordance with the terms of the Offer. Such acceptance for payment shall revoke all prior proxies granted by the undersigned at any time with respect to such Shares (and any such other Shares or securities or rights) and no subsequent proxies will be given (and if given will be deemed to be ineffective) with respect thereto by the undersigned. The undersigned acknowledges that in order for Shares to be deemed validly tendered, immediately upon the acceptance for payment of such Shares, Purchaser or Purchaser's designee must be able to exercise full voting and other rights of a record and beneficial holder with respect to such Shares. 3 The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby (and any and all other Shares or securities or rights issued or issuable in respect thereof on or after February 29, 2000), and that, when the same are accepted for payment by Purchaser, Purchaser will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and the same will not be subject to any adverse claim. The undersigned, upon request, will execute and deliver any additional documents deemed by the Depositary or Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby (and any such other Shares or securities or rights). No authority herein conferred or agreed to be conferred in this Letter of Transmittal shall be affected by, and all such authority shall survive, the death or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators and legal representatives of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. The undersigned understands that tenders of Shares pursuant to any one of the procedures described in Section 2 of the Offer to Purchase and in the instructions hereto will constitute a binding agreement between the undersigned and Purchaser upon the terms and subject to the conditions of the Offer. The undersigned recognizes that, under certain circumstances set forth in the Offer to Purchase, Purchaser may not be required to accept for payment any of the Shares tendered hereby. Unless otherwise indicated herein under "Special Payment Instructions," please issue the check for the purchase price and/or return any certificates representing Shares not tendered or accepted for payment in the name(s) of the registered holder(s) appearing under "Description of Shares Tendered." Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price and/or return any certificates representing Shares not tendered or accepted for payment (and accompanying documents, as appropriate) to the registered holder(s) appearing under "Description of Shares Tendered" at the address shown below such registered holder(s) name(s). In the event that either or both the Special Delivery Instructions and the Special Payment Instructions are completed, please issue the check for the purchase price and/or return any certificates representing Shares not tendered or accepted for payment in the name(s) of, and deliver such check and/or return such certificates to, the person or persons so indicated. Stockholders tendering Shares by book-entry transfer may request that any Shares not accepted for payment be returned by crediting such stockholder's account maintained at DTC. The undersigned recognizes that Purchaser has no obligation pursuant to the "Special Payment Instructions" to transfer any Shares from the name of the registered holder(s) thereof if Purchaser does not accept for payment any of the Shares so tendered hereby. 4 SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the purchase price of Shares purchased (less the amount of any federal income and backup withholding tax required to be withheld) or certificates for Shares not tendered or not purchased are to be issued in the name of someone other than the undersigned. Issue: / / check / / certificate(s) to: Name: __________________________________________________________________________ (PLEASE PRINT) Address: _______________________________________________________________________ ________________________________________________________________________________ (ZIP CODE) ________________________________________________________________________________ (TAXPAYER IDENTIFICATION NO.) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the purchase price of Shares purchased (less the amount of any federal income and backup withholding tax required to be withheld) or certificates for Shares not tendered or not purchased are to be mailed to someone other than the undersigned or to the undersigned at an address other than that shown below the undersigned's signature(s). Mail: / / check / / certificate(s) to: Name: __________________________________________________________________________ (PLEASE PRINT) Address: _______________________________________________________________________ ________________________________________________________________________________ (ZIP CODE) ________________________________________________________________________________ (TAXPAYER IDENTIFICATION NO.) 5 SIGN HERE (PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW) ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ SIGNATURE(S) OF OWNERS Dated ____________________________________, 2000 Name(s) ________________________________________________________________________ ________________________________________________________________________________ (PLEASE PRINT) Capacity (Full Title) __________________________________________________________ Address ________________________________________________________________________ ________________________________________________________________________________ (INCLUDE ZIP CODE) Area Code and Telephone Number ____________________________________ (Must be signed by registered holder(s) exactly as name(s) appear(s) on stock certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, agent, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth full title and see Instruction 5.) GUARANTEE OF SIGNATURE(S) (IF REQUIRED; SEE INSTRUCTIONS 1 AND 5) FOR USE BY FINANCIAL INSTITUTIONS ONLY. PLACE MEDALLION GUARANTEE IN SPACE BELOW. Authorized Signature(s) ________________________________________________________ Name ___________________________________________________________________________ Name of Firm ___________________________________________________________________ Address ________________________________________________________________________ (INCLUDE ZIP CODE) Area Code and Telephone Number ____________________________________ Dated ____________________________________, 2000 6 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of Transmittal is required (i) if this Letter of Transmittal is signed by the registered holder(s) of the Shares (which term, for purposes of this document, shall include any participant in DTC whose name appears on a security position listing as the owner of Shares) tendered herewith, unless such holder has completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on this Letter of Transmittal, or (ii) if such Shares are tendered for the account of a firm that is a member in good standing of the Security Transfer Agent's Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchange Medallion Program (each being hereinafter referred to as an "Eligible Institution"). In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 5. 2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of Transmittal is to be completed by stockholders either if certificates representing Shares are to be forwarded herewith to the Depositary or, unless an Agent's Message (as defined below) is utilized, if tenders of Shares are to be made pursuant to the procedures for delivery by book-entry transfer set forth in Section 2 of the Offer to Purchase. Certificates representing all physically tendered Shares, or any book-entry confirmation of Shares, as the case may be, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, (or, in connection with a book-entry transfer, an Agent's Message) and any other documents required by this Letter of Transmittal must be received by the Depositary at one of its addresses set forth herein on or prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase). If a stockholder's certificate(s) representing Shares are not immediately available (or the procedure for the book-entry transfer cannot be completed on a timely basis) or time will not permit all required documents to reach the Depositary on or prior to the Expiration Date, such stockholder's Shares may nevertheless be tendered if the procedures for guaranteed delivery set forth in Section 2 of the Offer to Purchase are followed. Pursuant to such procedure, (i) such tender must be made by or through an Eligible Institution, (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by Purchaser, must be received by the Depositary on or prior to the Expiration Date, and (iii) the certificates representing all tendered Shares, in proper form for transfer, or Book-Entry Confirmation of Shares, as the case may be, in each case together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees (or, in connection with a book-entry transfer, an Agent's Message) and any other documents required by this Letter of Transmittal, must be received by the Depositary within three New York Stock Exchange trading days after the date of execution of such Notice of Guaranteed Delivery, all as provided in Section 2 of the Offer to Purchase. The term "Agent's Message" means a message transmitted through electronic means by DTC to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that DTC has received an express acknowledgment from the DTC participant tendering the Shares that such participant has received, and agrees to be bound by, this Letter of Transmittal. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE CERTIFICATE(S) REPRESENTING SHARES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH DTC, IS AT THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER. THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF SUCH DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted, and no fractional Shares will be purchased. All tendering stockholders, by execution of this Letter of Transmittal (or facsimile thereof), waive any right to receive any notice of the acceptance of their Shares for payment. 3. INADEQUATE SPACE. If the space provided herein is inadequate, the certificate numbers and/or the number of Shares should be listed on a separate signed schedule attached hereto. 7 4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER SHARES BY BOOK-ENTRY TRANSFER). If fewer than all the Shares represented by any certificate submitted are to be tendered, fill in the number of Shares that are to be tendered in the box entitled "Number of Shares Tendered." In such case, new certificate(s) representing the remainder of the Shares that were represented by the old certificate(s) will be sent to the registered holder(s), unless otherwise provided in the appropriate box on this Letter of Transmittal, as soon as practicable after the Expiration Date. All Shares represented by certificate(s) delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond exactly with the name(s) as written on the face(s) of the certificate(s) without alteration, enlargement or any change whatsoever. If any of the Shares tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal is signed by the registered holder(s) of the Shares listed and tendered hereby, no endorsements of certificates or separate stock powers are required, unless payment or certificates for Shares not tendered or accepted for payment are to be issued to a person other than the registered holder(s). Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal or any certificates or stock powers are signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to Purchaser of such person's authority so to act must be submitted. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares tendered hereby, the certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear on the certificates. Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution, unless the signature is that of an Eligible Institution. 6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, Purchaser will pay or cause to be paid any stock transfer taxes with respect to the transfer and sale of purchased Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or if certificates representing Shares not tendered or accepted for payment are to be registered in the name of, any person other than the registered holder(s), or if tendered certificates are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder(s) or such other person) payable on account of the transfer to such person will be deducted from the purchase price, unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted. 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check and/or certificates representing Shares not tendered or accepted for payment are to be issued in the name of a person other than the signer of this Letter of Transmittal or if a check is to be sent and/or such certificates are to be returned to someone other than the signer of this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Stockholders tendering Shares by book-entry transfer may request that Shares not accepted for payment be credited to such account maintained at DTC as such stockholder may designate herein. If no such instructions are given, such Shares not accepted for payment will be returned by crediting the account at DTC designated above. 8. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s) representing Shares has been lost, destroyed or stolen, the stockholder should promptly contact The Bank of New York, which is the Company's transfer agent, by calling 1-800-524-4458. The stockholder will then be instructed as to the steps that must be taken in order to replace the certificate(s). This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost, destroyed or stolen certificates have been followed. 8 9. WAIVER OF CONDITIONS. The conditions to the Offer may be waived by Purchaser, in whole or in part, at any time and from time to time in Purchaser's sole discretion (subject to the provisions of the Merger Agreement referred to in the Offer to Purchase). 10. SUBSTITUTE FORM W-9. The tendering stockholder is required to provide the Depositary with a correct Taxpayer Identification Number ("TIN"), generally the stockholder's social security or federal employer identification number, on the Substitute Form W-9 which is provided below, and to certify whether the stockholder is subject to backup withholding of United States federal income tax. If a tendering stockholder is subject to federal backup withholding, the stockholder must cross out item (2) of the "Certification" box of the Substitute Form W-9. Failure to provide the information on the Substitute Form W-9 may subject the tendering stockholder to a $50 penalty imposed by the Internal Revenue Service ("IRS") and a 31% federal backup withholding tax on the payment of the purchase price. If the tendering stockholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, the stockholder should write "Applied For" in the space provided for the TIN in Part I, check the box in Part III, and sign and date the Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is not provided with a TIN within 60 days of its receipt of the Substitute Form W-9, the Depositary will withhold 31% on all payments of the purchase price until a TIN is provided to the Depositary. 11. NON-UNITED STATES HOLDERS. Non-United States holders must submit a completed IRS Form W-8 or Form W-8BEN to avoid backup withholding. IRS Form W-8 or Form W-8BEN may be obtained by contacting the Depositary at one of the addresses on the face of this Letter of Transmittal. 12. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance may be directed to the Information Agent at the address set forth below. Additional copies of the Offer to Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 may be obtained from the Information Agent or the Dealer Manager at their addresses set forth below or from your broker, dealer, commercial bank, trust company or other nominee. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF), TOGETHER WITH CERTIFICATES REPRESENTING SHARES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS, OR THE NOTICE OF GUARANTEED DELIVERY, MUST BE RECEIVED BY THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE. 9 IMPORTANT TAX INFORMATION Under United States federal income tax law, a stockholder whose tendered Shares are accepted for payment is required to provide the Depositary (as payer) with such stockholder's correct social security number, individual taxpayer identification number, or employer identification number (each a Taxpayer Identification Number or a "TIN") on Substitute Form W-9 provided below. If such stockholder is an individual, the TIN is such person's social security number. The TIN of a resident alien who does not have and is not eligible to obtain a social security number is such person's IRS individual taxpayer identification number. If a tendering stockholder is subject to federal backup withholding, the stockholder must cross out item (2) of the Certification box on the Substitute Form W-9. If the Depositary is not provided with the correct TIN, the stockholder may be subject to a $50 penalty imposed by the IRS. In addition, payments that are made to such stockholder with respect to Shares purchased pursuant to the Offer may be subject to federal backup withholding. Certain stockholders (including, among others, all corporations and certain non-United States individuals) are not subject to federal backup withholding. In order for a non-United States individual to qualify as an exempt recipient, that stockholder must submit to the Depositary a properly completed IRS Form W-8 or Form W-8BEN, signed under penalties of perjury, attesting to that individual's exempt status. Such forms may be obtained from the Depositary. Exempt stockholders, other than non-United States individuals, should furnish their TIN, write "EXEMPT" on the face of the Substitute Form W-9 below, and sign, date and return the Substitute Form W-9 to the Depositary. See the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional instructions. If federal backup withholding applies, the Depositary is required to withhold 31% of any payments made to the stockholder. Federal backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the IRS. PURPOSE OF SUBSTITUTE FORM W-9 To prevent federal backup withholding on payments that are made to a stockholder with respect to Shares purchased pursuant to the Offer, the stockholder is required to notify the Depositary of such stockholder's correct TIN by completing the Substitute Form W-9 below certifying that the TIN provided on such form is correct (or that such stockholder is awaiting a TIN) and that (i) such holder is exempt from federal backup withholding, (ii) such holder has not been notified by the IRS that such holder is subject to federal backup withholding as a result of a failure to report all interest or dividends, or (iii) the IRS has notified such holder that such holder is no longer subject to federal backup withholding (see Part 2 of Substitute Form W-9). WHAT NUMBER TO GIVE THE DEPOSITARY The stockholder is required to give the Depositary the TIN of the record owner of the Shares. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidelines on which number to report. If the tendering stockholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, such stockholder should write "Applied For" in the space provided for in the TIN in Part I, check the box in Part III, and sign and date the Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is not provided with a TIN within 60 days, the Depositary may withhold 31% on all payments of the purchase price until a TIN is provided to the Depositary. 10 --------------------------------------------------------------------------------------------------------------- PAYER: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. --------------------------------------------------------------------------------------------------------------- SUBSTITUTE PART I TAXPAYER IDENTIFICATION NO.--FOR ALL ACCOUNTS PART II FOR PAYEES EXEMPT FROM FORM W-9 BACKUP WITHHOLDING (SEE ENCLOSED GUIDELINES) ---------------------------------------------- DEPARTMENT OF THE Enter your taxpayer -------------- TREASURY identification number in the SOCIAL SECURITY NUMBER PART III INTERNAL REVENUE appropriate box. For most OR AWAITING TIN / / SERVICE individuals and sole -------------- PAYER'S REQUEST FOR proprietors, this is your EMPLOYEE TAXPAYER IDENTIFICATION Social Security Number. For IDENTIFICATION NUMBER NO. other entities, it is your Employer Identification Number. If you do not have a number, see "How to Obtain a TIN" in the enclosed GUIDELINES. Note: If the account is in more than one name, see the chart on page 2 of the enclosed GUIDELINES to determine what number to enter. --------------------------------------------------------------------------------------------------------------- CERTIFICATION--Under penalties of perjury, I certify that: (1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number to be issued to me); (2) I am not subject to backup withholding either because (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I no longer subject to backup withholding; and (3) Any information provided on this form is true, correct and complete. YOU MUST CROSS OUT ITEM (2) ABOVE IF YOU HAVE BEEN NOTIFIED BY THE IRS THAT YOU ARE CURRENTLY SUBJECT TO BACKUP WITHHOLDING BECAUSE OF UNDERREPORTING INTEREST OR DIVIDENDS ON YOUR TAX RETURN AND YOU HAVE NOT RECEIVED A NOTICE FROM THE IRS ADVISING YOU THAT BACKUP WITHHOLDING HAS TERMINATED. --------------------------------------------------------------------------------------------------------------- SIGNATURE --------------------------------------------------------------------------------------------------------------- DATE - ---------------------------------------------------------------------------------------------------------------, 1999 ---------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. ------------------------------------------------------------------------------------------- YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU ARE AWAITING YOUR TIN. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a Taxpayer Identification Number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office, or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number within (60) days, 31% of all reportable payments made to me thereafter will be withheld until I provide a number. Signature: Date:---------------------------------, 2000 ----------------------------------- -------------------------------------------------------------------------------------------
11 THE INFORMATION AGENT FOR THE OFFER IS: [LOGO] 17 State Street, 10th Floor New York, NY 10004 Banks and Brokers Call Collect: (212) 440-9800 All Others Call Toll Free: (800) 223-2064 THE DEALER MANAGER FOR THE OFFER IS: CREDIT SUISSE FIRST BOSTON CORPORATION Eleven Madison Avenue New York, NY 10010-3629 Call Toll Free: (800) 881-8320 EX-99.(A)(1)(C) 4 NOTICE OF GUARANTEED DELIVERY Notice of Guaranteed Delivery for Tender of Shares of Common Stock (Including the Associated Rights to Purchase Preferred Stock) of SHOREWOOD PACKAGING CORPORATION by INTERNATIONAL PAPER-37, INC. a wholly owned subsidiary of INTERNATIONAL PAPER COMPANY (Not to be used for Signature Guarantees) This form, or one substantially equivalent hereto, must be used to accept the Offer (as defined below) if certificates representing shares of common stock, par value $.01 per share, including the associated rights to purchase shares of preferred stock (collectively, the "Shares"), of Shorewood Packaging Corporation, a Delaware corporation (the "Company"), are not immediately available (or if the procedure for book-entry transfer cannot be completed on a timely basis), or if time will not permit all required documents to reach the Depositary prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase (as defined below)). Such form may be delivered by hand, transmitted by facsimile transmission or mailed to the Depositary at the addresses and facsimile number set forth below. See Section 2 of the Offer to Purchase. THE DEPOSITARY FOR THE OFFER IS: CHASEMELLON SHAREHOLDER SERVICES, L.L.C. BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND: ChaseMellon Shareholder Services, (FOR ELIGIBLE INSTITUTIONS ONLY) ChaseMellon Shareholder Services, L.L.C. (201) 296-4293 L.L.C. P.O. Box 3301 120 Broadway, 13th Floor South Hackensack, NJ 07606 CONFIRM FACSIMILE BY TELEPHONE: New York, NY 10271 (201) 296-4860 (FOR CONFIRMATION ONLY) BY OVERNIGHT COURIER: ChaseMellon Shareholder Services, L.L.C. 85 Challenger Road Ridgefield Park, NJ 07660
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. The Eligible Institution that completes this form must communicate the guarantee to the Depositary and must deliver the Letter of Transmittal or an Agent's Message (as defined in Section 2 of the Offer to Purchase) and certificates representing the Shares to the Depositary within the time period specified herein. Failure to do so could result in a financial loss to the Eligible Institution. Ladies and Gentlemen: The undersigned hereby tenders to International Paper-37, Inc., a Delaware corporation ("Purchaser") and a wholly owned subsidiary of International Paper Company, a New York corporation ("Parent"), upon the terms and subject to the conditions set forth in the Offer to Purchase dated February 29, 2000 (the "Offer to Purchase") and the related Letter of Transmittal (which, including any amendments or supplements thereto, collectively constitute the "Offer"), receipt of which is hereby acknowledged, the number of Shares specified below pursuant to the guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase. Number of Shares: ______________________________________________________________ Name(s) of Record Holder(s): ___ Certificates No(s). (if available): ____________________________________________ ________________________________ ________________________________ ________________________________ ________________________________ Address(es): ___________________ Check box if Share(s) will be tendered by Book-Entry Transfer ________________________________ Area Code and Telephone Number(s) ______________________________________________________________________ / / The Depository Trust Company ________________________________ Account Number: ________________________________________________________________ Signatures: ____________________ Date: __________________________________________________________________________ ________________________________ Dated: _________________________ THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a member in good standing of the Security Transfer Agent's Medallion Program, the New York Stock Exchange Medallion Signature Program or the Stock Exchange Medallion Program (each, an "Eligible Institution"), (a) represents that the above named person(s) own(s) the Shares tendered hereby within the meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (b) represents that such tender of Shares complies with Rule 14e-4 under the Exchange Act, and (c) guarantees delivery to the Depositary, at one of its addresses set forth above, of certificates representing the Shares tendered hereby in proper form for transfer, or confirmation of book-entry transfer of such Shares into the Depositary's accounts at The Depository Trust Company, in each case with delivery of a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees, or an Agent's Message in the case of a book-entry transfer, and any other required documents, within three New York Stock Exchange trading days after the date hereof. Name of Firm: __________________________________________________________________ ________________________________ (AUTHORIZED SIGNATURE) Address: _______________________________________________________________________ Name: __________________________ (PLEASE TYPE OR PRINT) ________________________________________________________________________________ Title: _________________________ ________________________________________________________________________________ Date: __________________________ ________________________________________________________________________________ (ZIP CODE) Area Code and Telephone Number: ________________________________________________ NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED DELIVERY. CERTIFICATES FOR SHARES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. EX-99.(A)(1)(D) 5 BROKER/DEALER LETTER [LOGO] [LOGO] Offer to Purchase for Cash All Outstanding Shares of Common Stock (Including the Associated Rights to Purchase Preferred Stock) of SHOREWOOD PACKAGING CORPORATION by INTERNATIONAL PAPER-37, INC. a wholly owned subsidiary of INTERNATIONAL PAPER COMPANY THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, MARCH 27, 2000, UNLESS THE OFFER IS EXTENDED. February 29, 2000 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by International Paper-37, Inc., a Delaware corporation ("Purchaser") and a wholly owned subsidiary of International Paper Company, a New York corporation ("Parent") to act as Dealer Manager in connection with Purchaser's offer to purchase all of the outstanding shares of common stock, par value $.01 per share, including the associated rights to purchase preferred stock (collectively, the "Shares"), of Shorewood Packaging Corporation, a Delaware corporation (the "Company"), at a price of $21.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated February 29, 2000 (the "Offer to Purchase") and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"), copies of which are enclosed herewith. The Offer is being made in connection with the Agreement and Plan of Merger, dated as of February 16, 2000 (the "Merger Agreement"), among Parent, Purchaser and the Company. The Merger Agreement provides, among other things, that Purchaser will be merged with and into the Company (the "Merger") following the satisfaction or waiver of each of the conditions to the Merger set forth in the Merger Agreement. Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold Shares registered in your name or in the name of your nominee. For your information and for forwarding to your clients, we are enclosing the following documents: 1. The Offer to Purchase. 2. The Letter of Transmittal to be used by stockholders of the Company in accepting the Offer, including a Certification of Taxpayer Identification Number on Substitute Form W-9. Facsimile copies of the Letter of Transmittal (with manual signatures) may be used to tender Shares. 3. A letter to stockholders of the Company from Marc P. Shore, Chairman of the Board and Chief Executive Officer of the Company, together with a Solicitation/Recommendation Statement on Schedule 14D-9, dated February 29, 2000 filed by the Company with the Securities and Exchange Commission, which includes the recommendation of the Board of Directors of the Company that stockholders accept the Offer and tender their Shares to Purchaser pursuant to the Offer. 4. A printed form of letter which may be sent to your clients for whose account you hold Shares in your name or in the name of your nominee with space provided for obtaining such clients' instructions with regard to the Offer. 5. The Notice of Guaranteed Delivery to be used to accept the Offer if certificates representing Shares are not immediately available or if time will not permit all required documents to reach the Depositary (as defined below) prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase) or if the procedures for book-entry transfer cannot be completed on a timely basis. 6. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9. Stockholders who fail to complete and sign the Substitute Form W-9 may be subject to a required federal backup withholding tax of 31% of the gross proceeds payable to such stockholder or other payee pursuant to the Offer. See Section 2 of the Offer to Purchase. 7. A return envelope addressed to ChaseMellon Shareholder Services, L.L.C. (the "Depositary"). Your attention is directed to the following: 1. The tender price is $21.00 per Share, net to the seller in cash, without interest, upon the terms and conditions set forth in the Offer to Purchase. 2. The Board of Directors of the Company unanimously (i) determined that the Offer, the Merger and the Merger Agreement are advisable, fair to, and in the best interests of, the Company's stockholders, (ii) approved the Merger, the Offer, the Merger Agreement and the other transactions contemplated by the Merger Agreement and (iii) recommends that the Company's stockholders accept the Offer and tender their Shares pursuant thereto, and approve and adopt the Merger Agreement. 3. The Offer and withdrawal rights will expire at 12:00 midnight, New York City time, on Monday, March 27, 2000, unless the Offer is extended. 4. The Offer is being made for all of the outstanding Shares. The Offer is conditioned upon, among other things, there being validly tendered and not properly withdrawn prior to the expiration date of the Offer that number of Shares which represents not less than fifty-one percent of the total issued and outstanding Shares on a fully diluted basis (excluding Shares held by the Company or any of its subsidiaries) and (ii) the expiration or termination of any and all waiting periods applicable to the transactions contemplated by the Merger Agreement under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the Competition Act (Canada), the Investment Canada Act and any similar legal regime in any other country applicable to significant operations of Parent or any of its subsidiaries or the Company or any of its subsidiaries. The Offer is also subject to other terms and conditions. See Section 15 of the Offer to Purchase. 5. Stockholders who tender Shares will not be obligated to pay brokerage fees or commissions to the Dealer Manager, the Information Agent or the Depositary or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares by Purchaser pursuant to the Offer. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will accept for payment and pay for all Shares which are validly tendered on or prior to the Expiration Date and not theretofore properly withdrawn pursuant to the Offer. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates representing such Shares (or a timely confirmation of a book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company, pursuant to the procedures described in Section 2 of the Offer to Purchase), (ii) a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees (or, in connection with a book-entry transfer, an Agent's Message (as defined in Section 2 of the Offer to Purchase)), and (iii) all other documents required by the Letter of Transmittal. If holders of Shares wish to tender, but it is impracticable for them to forward their certificates or other required documents prior to the expiration of the Offer, a tender may be effected by following the guaranteed delivery procedures specified under Section 2 of the Offer to Purchase. Purchaser will not pay any fees or commissions to any broker or dealer or to any other person (other than the Depositary, the Information Agent and the Dealer Manager) in connection with the solicitation of tenders of Shares pursuant to the Offer. Purchaser will, however, upon request, reimburse you for customary mailing and handling expenses incurred by you in forwarding the enclosed materials to your clients. Purchaser will pay or cause to be paid any stock transfer taxes payable on the transfer of Shares to it, except as otherwise provided in Instruction 6 of the Letter of Transmittal. YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, MARCH 27, 2000, UNLESS THE OFFER IS EXTENDED. Any inquiries you may have with respect to the Offer should be directed to, and additional copies of the enclosed materials may be obtained by contacting, the undersigned at (800) 881-8320 (call toll free). Very truly yours, CREDIT SUISSE FIRST BOSTON CORPORATION NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF PURCHASER, PARENT, THE COMPANY, THE DEPOSITARY, THE DEALER MANAGER OR THE INFORMATION AGENT, OR ANY AFFILIATE OF ANY OF THE FOREGOING, OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. EX-99.(A)(1)(E) 6 CLIENT LETTER Offer to Purchase for Cash All Outstanding Shares of Common Stock (Including the Associated Rights to Purchase Preferred Stock) of SHOREWOOD PACKAGING CORPORATION by INTERNATIONAL PAPER-37, INC. a wholly owned subsidiary of INTERNATIONAL PAPER COMPANY THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, MARCH 27, 2000, UNLESS THE OFFER IS EXTENDED. February 29, 2000 To Our Clients: Enclosed for your consideration is an Offer to Purchase, dated February 29, 2000 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer") relating to the offer by International Paper-37, Inc., a Delaware corporation ("Purchaser") and a wholly owned subsidiary of International Paper Company, a New York corporation ("Parent"), to purchase all of the outstanding shares of common stock, par value $.01 per share, including the associated rights to purchase preferred stock (collectively, the "Shares"), of Shorewood Packaging Corporation, a Delaware corporation (the "Company"), at a price of $21.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer. The Offer is being made in connection with the Agreement and Plan of Merger, dated as of February 16, 2000 (the "Merger Agreement"), among Parent, Purchaser and the Company. The Merger Agreement provides, among other things, that Purchaser will be merged with and into the Company (the "Merger") following the satisfaction or waiver of each of the conditions to the Merger set forth in the Merger Agreement. WE ARE THE HOLDER OF RECORD (DIRECTLY OR INDIRECTLY) OF SHARES FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US OR OUR NOMINEES AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. We request instructions as to whether you wish to have us tender on your behalf any or all of the Shares held by us for your account, pursuant to the terms and subject to the conditions set forth in the Offer. Your attention is directed to the following: 1. The tender price is $21.00 per Share, net to the seller in cash, without interest, upon the terms and conditions set forth in the Offer to Purchase. 2. The Board of Directors of the Company unanimously (i) determined that the Offer, the Merger and the Merger Agreement are advisable, fair to, and in the best interests of, the Company's stockholders, (ii) approved the Merger, the Offer, the Merger Agreement and the other transactions contemplated by the Merger Agreement and (iii) recommends that the Company's stockholders accept the Offer and tender their Shares pursuant thereto and approve and adopt the Merger Agreement. 3. The Offer and withdrawal rights will expire at 12:00 midnight, New York City time, on Monday, March 27, 2000, unless the Offer is extended. 4. The Offer is being made for all of the outstanding Shares. The Offer is conditioned upon, among other things, there being validly tendered and not properly withdrawn prior to the expiration date of the Offer that number of Shares which represents not less than fifty-one percent of the total issued and outstanding Shares on a fully diluted basis (excluding Shares held by the Company or any of its subsidiaries) and (ii) the expiration or termination of any and all waiting periods applicable to the transactions contemplated by the Merger Agreement under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the Competition Act (Canada), the Investment Canada Act and any similar legal regime in any other country applicable to significant operations of Parent or any of its subsidiaries or the Company or any of its subsidiaries. The Offer is also subject to other terms and conditions. See Section 15 of the Offer to Purchase. 5. Stockholders who tender Shares will not be obligated to pay brokerage fees or commissions to the Dealer Manager, the Information Agent or the Depositary or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares by Purchaser pursuant to the Offer. If you wish to have us tender any or all of your Shares, please complete, sign and return the instruction form set forth below. An envelope to return your instructions to us is enclosed. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise specified on the instruction form set forth below. Please forward your instructions to us as soon as possible to allow us ample time to tender your Shares on your behalf prior to the expiration of the Offer. The Offer is made solely by the Offer to Purchase and the related Letter of Transmittal and any supplements and amendments thereto. Purchaser is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to any valid state statute. If Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, Purchaser will make a good faith effort to comply with any such state statute or seek to have such statute declared inapplicable to the Offer. If, after such good faith effort, Purchaser cannot comply with any such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer will be deemed to be made on behalf of Purchaser by Credit Suisse First Boston Corporation or one or more registered brokers or dealers licensed under the laws of such jurisdiction. Instructions with Respect to the Offer to Purchase for Cash All Outstanding Shares of Common Stock (Including the Associated Rights to Purchase Preferred Stock) of SHOREWOOD PACKAGING CORPORATION by INTERNATIONAL PAPER-37, INC. a wholly owned subsidiary of INTERNATIONAL PAPER COMPANY The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated February 29, 2000, ("Offer to Purchase") and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer") relating to the offer by International Paper-37, Inc., a Delaware corporation ("Purchaser") and a wholly owned subsidiary of International Paper Company, a New York corporation ("Parent") to act as Dealer Manager in connection with Purchaser's offer to purchase all of the outstanding shares of common stock, par value $.01 per share, including the associated rights to purchase preferred stock (collectively, the "Shares"), of Shorewood Packaging Corporation (the "Company"), at a price of $21.00 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer. This will instruct you to tender to Purchaser the number of Shares indicated below (or, if no number is indicated below, all Shares) held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer. Number of Shares to be Tendered: SIGN HERE Shares* SIGNATURE(S) Account Number: Dated:, 2000 PLEASE PRINT NAME(S) AND ADDRESS(ES) HERE AREA CODE AND PHONE NUMBER(S) TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER(S)
* Unless otherwise indicated, it will be assumed that all of your Shares held by us for your account are to be tendered. EX-99.(A)(1)(F) 7 FORM W-9 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER--Social Security numbers have nine digits separated by two hyphens: i.e., 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e., 000-000000. The table below will help determine the number to give the payer. - ----------------------------------------------- GIVE THE SOCIAL SECURITY NUMBER OF FOR THIS TYPE OF ACCOUNT: - ----------------------------------------------- 1. An individual's The individual account 2. Two or more The actual owner of individuals (joint the account or, if account) combined funds, the first individual on the account(1) 3. Husband and wife The actual owner of (joint account) the account or, if joint funds, either person(1) 4. Custodian account of The minor(2) a minor (Uniform Gift to Minors Act) 5. Adult and minor The adult or, if the (joint account) minor is the only contributor, the minor(1) 6. Account in the name The ward, minor, or of guardian or incompetent committee for a person(3) designated ward, minor, or incompetent person 7. a. The usual The revocable savings grantor-trustee(1) trust account (in which grantor is also trustee) b. So-called "trust" The actual owner(1) account that is not a legal or valid trust under State law 8. Sole proprietorship The owner(4) account - ----------------------------------------------- GIVE THE EMPLOYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF - ----------------------------------------------- 9. A valid trust, Legal entity (do not estate, or pension furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title)(5) 10. Corporate account The corporation 11. Religious, The organization charitable, or educational organization account 12. Partnership account The partnership held in the name of the business 13. Association, club or The organization other tax-exempt organization 14. A broker or The broker or registered nominee nominee 15. Account with the The public entity Department of Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments.
- --------------------------------------------- - --------------------------------------------- (1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show the name of the owner, or the business or "doing business as" name. Either the social security number or the employer identification number of the owner may be used. (5) List first and circle the name of the legal trust, estate or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments include the following: - A corporation. - A financial institution - An organization exempt from tax under section 501(a), or an individual retirement plan. - The United States or any agency or instrumentality thereof. - A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. - A foreign government, a political subdivision of a foreign government, or any agency or instrumentality thereof. - An international organization or any agency or instrumentality thereof. - A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. - A real estate investment trust. - A common trust fund operated by a bank under section 584(a). - An exempt charitable remainder trust, or a non-exempt trust described in section 4947(a)(1). - An entity registered at all times under the Investment Company Act of 1940. - A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: - Payments to nonresident aliens subject to withholding under section 1441. - Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. - Payments of patronage dividends where the amount received is not paid in money. - Payments made by certain foreign organizations. - Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: - Payments of interest on obligations issued by individuals. NOTE: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer(1)s trade or business and you have not provided your correct taxpayer identification number to the payer. - Payments of tax-exempt interest (including exempt-interest dividends under section 852). - Payments described in section 6049(b)(5) to nonresident aliens. - Payments on tax-free covenants bonds under section 1451. - Payments made by certain foreign organizations. - Payments made to a nominee. EXEMPT PAYEES DESCRIBED ABOVE SHOULD FILE FORM W-9 TO AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER, IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM. Certain payments other than interest, dividends, and patronage dividends that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045, and 6050A. PRIVACY ACT NOTICES. Section 6109 requires most recipients of dividend interest, or other payments to give taxpayer identification numbers to payers who must report the payments to IRS. IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBERS.--If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION, CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE. EX-99.(A)(1)(G) 8 SUMMARY ADVERTISEMENT/EXHIBIT 99(A)(1)(G) This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares (as defined below). The Offer (as defined below) is made solely by the Offer to Purchase dated February 29, 2000, and the related Letter of Transmittal and any amendments or supplements thereto, and is being made to all holders of Shares. The Offer, however, is not being made to, nor will tenders be accepted from or on behalf of, holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. Purchaser (as defined below) may in its discretion, however, take such action as it may deem necessary to make the Offer in any jurisdiction and extend the Offer to holders of Shares in such jurisdiction. In jurisdictions whose laws require that the Offer be made by a licensed broker or dealer, the Offer shall be deemed to be made on Purchaser's behalf by Credit Suisse First Boston Corporation ("Credit Suisse First Boston" or the "Dealer Manager") or by one or more registered brokers or dealers licensed under the laws of such jurisdiction. Notice of Offer to Purchase for Cash All Outstanding Shares of Common Stock (Including the Associated Rights to Purchase Preferred Stock) of Shorewood Packaging Corporation at $21.00 Net Per Share by International Paper-37, Inc. a wholly owned subsidiary of International Paper Company International Paper-37, Inc. ("Purchaser"), a Delaware corporation and a wholly owned subsidiary of International Paper Company, a New York corporation ("Parent"), is offering to purchase all outstanding shares of common stock, par value $.01 per share (the "Common Stock") of Shorewood Packaging Corporation (the "Company"), together with the associated rights to purchase preferred stock issued pursuant to the Rights Agreement, dated as of June 12, 1995 (the "Rights Agreement"), between the Company and The Bank of New York, as Rights Agent (the "Rights" and, together with the Common Stock, the "Shares"), at a price of $21.00 per Share, net to the selling stockholder in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase dated February 29, 2000 (the "Offer to Purchase") and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). Stockholders of record who tender directly to the Depositary (as defined below) will not be obligated to pay brokerage fees or commissions or, subject to Instruction 6 of the Letter of Transmittal, stock transfer taxes, if any, on the purchase of Shares by Purchaser pursuant to the Offer. Stockholders who hold their Shares through a broker or bank should consult such institution as to whether it charges any service fees. Purchaser will pay all charges and expenses of the Dealer Manager, ChaseMellon Shareholder Services, L.L.C., which is acting as depositary (the "Depositary"), and Georgeson Shareholder Communications Inc., which is acting as the information agent (the "Information Agent"), incurred in connection with the Offer. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, MARCH 27, 2000, UNLESS THE OFFER IS EXTENDED. The Offer is conditioned upon, among other things, (1) there being validly tendered and not properly withdrawn prior to the Expiration Date of the Offer that number of Shares which represents not less than fifty-one percent of the total issued and outstanding Shares on a fully diluted basis (excluding any shares held by the Company or any of its subsidiaries) (the "Minimum Condition") and (2) the expiration or termination of any and all waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the Competition Act (Canada), the Investment Canada Act and any similar legal regime in any other country applicable to significant operations of Parent or any of its subsidiaries or the Company or any of its subsidiaries. The Offer is also subject to other conditions. See Section 15 of the Offer to Purchase. The Offer is not conditioned upon Parent or Purchaser obtaining financing. Certain stockholders of the Company who, in the aggregate, own approximately 17% of the Shares outstanding (approximately 15% on a fully diluted basis) have entered into a stockholders agreement with Parent and Purchaser pursuant to which they have agreed, among other things, to tender pursuant to the Offer, and not to withdraw, their Shares. The Offer is being made pursuant to an Agreement and Plan of Merger dated as of February 16, 2000 (the "Merger Agreement"), among Parent, Purchaser and the Company. The Merger Agreement provides, among other things, that following the completion of the Offer and the satisfaction or waiver, if permissible, of all conditions set forth in the Merger Agreement and in accordance with the General Corporation Law of the State of Delaware (the "DGCL"), Purchaser will be merged with and into the Company (the "Merger"), with the Company surviving the Merger as a wholly owned subsidiary of Parent. At the effective time of the Merger (the "Effective Time"), each outstanding Share (other than Shares held in the Company's treasury immediately before the Effective Time, and each Share held by Parent, Purchaser, any other subsidiary of Parent or any subsidiary of the Company immediately before the Effective Time, all of which will be cancelled, and other than Shares with respect to which appraisal rights are properly exercised under the DGCL) will be converted into the right to receive $21.00 in cash, without interest thereon. The Merger Agreement is more fully described in Section 11 of the Offer to Purchase. The Board of Directors of the Company unanimously (1) determined that the Offer, the Merger and the Merger Agreement are advisable, fair to, and in the best interests of, the Company's stockholders, (2) approved the Merger, the Offer, the Merger Agreement and the other transactions contemplated by the Merger Agreement and (3) recommends that the Company's stockholders accept the Offer and tender their Shares pursuant thereto and approve and adopt the Merger Agreement. For purposes of the Offer, Purchaser shall be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not properly withdrawn when, as and if Purchaser gives oral or written notice to the Depositary, as agent for the tendering stockholders, of its acceptance for payment of such Shares. Payment for Shares so accepted will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from Purchaser and transmitting payment to validly tendering stockholders. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates representing such Shares (or timely confirmation of a book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company ("DTC")), (ii) a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees or an Agent's Message (as defined in the Offer to Purchase) in connection with a book-entry transfer and (iii) any other documents required by the Letter of Transmittal. The term "Expiration Date" means 12:00 midnight, New York City time, on Monday, March 27, 2000, unless and until Purchaser (subject to the terms and conditions of the Merger Agreement) extends the period of time for which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Purchaser, shall expire prior to the purchase of any Shares. Purchaser may, without the consent of the Company, extend the Offer beyond the initial Expiration Date in the following events: (i) from time to time if, at the initial Expiration Date (or any subsequent Expiration Date), any of the conditions to the Offer (other than the Minimum Condition) shall not have been satisfied or waived, until such conditions are satisfied or waived; (ii) for any period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission or the staff thereof applicable to the Offer or any period required by applicable law; (iii) if all the conditions to the Offer (other than the Minimum Condition) are satisfied or waived, but the Minimum Condition has not been satisfied, for one or more periods not to exceed thirty (30) business days (for all such extensions); or (iv) if all of the conditions to the Offer are satisfied or waived but the number of Shares validly tendered and not withdrawn is less than 90% of the number of then outstanding Shares on a fully diluted basis, for an aggregate period not to exceed twenty (20) business days (for all such extensions), provided that, in the case of an extension pursuant to clause (iv), Purchaser must accept and promptly pay for all securities tendered prior to the date of such extension and otherwise meet the requirements of Rule 14d-11 under the Securities Exchange Act of 1934 (the "Exchange Act"), as amended, in connection with each such extension. Such an extension pursuant to clause (iv) will constitute a subsequent offering period. A subsequent offering period is an additional period of time from 3 to 20 business days in length, beginning after Purchaser purchases Shares tendered in the Offer, during which stockholders may tender, but not withdraw, Shares and receive the Offer Price. Purchaser intends to include a subsequent offering period in the event that all conditions to the Offer have been satisfied or waived but less than 90% of the outstanding Shares on a fully diluted basis have been validly tendered and not withdrawn as of the Expiration Date. Pursuant to Rule 14d-7 under the Exchange Act, no withdrawal rights apply to Shares tendered during a subsequent offering period and no withdrawal rights apply during the subsequent offering period with respect to Shares tendered in the Offer and accepted for payment. During a subsequent offering period, Purchaser will promptly purchase and pay for any Shares tendered at the same price paid in the Offer. See Section 1 of the Offer to Purchase. In addition, Parent and Purchaser have agreed that Purchaser shall from time to time extend the Offer, if requested by the Company, (i) if at the initial Expiration Date (or any subsequent Expiration Date), any of the conditions to the Offer other than (or in addition to) the Minimum Condition shall not have been waived or satisfied, until (taking into account all such extensions) the earlier of June 30, 2000 or such earlier date upon which any such condition (other than the Minimum Condition) shall not be reasonably capable of being satisfied prior to June 30, 2000; or (ii) if at the initial Expiration Date (or any subsequent Expiration Date), all of the conditions to the Offer other than the Minimum Condition shall have been waived or satisfied and the Minimum Condition shall not have been satisfied, until the earlier of 10 business days after such Expiration Date or June 30, 2000. Purchaser shall cause any such extension by giving oral or written notice of such extension to the Depositary, which will be followed by public announcement thereof no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date. During any such extension, all Shares previously tendered and not properly withdrawn will remain subject to the Offer, subject to the right, if any, of a tendering stockholder to withdraw such stockholder's Shares. Under no circumstances will interest be paid on the purchase price to be paid for the Shares pursuant to the Offer, regardless of any extension of the Offer or any delay in making such payment. Tenders of Shares made pursuant to the Offer are irrevocable, except that Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date, and unless theretofore accepted for payment pursuant to the Offer, may also be withdrawn at any time after April 28, 2000 except as provided with respect to any subsequent offering period. For a withdrawal of Shares tendered to be effective, a written or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth in the Offer to Purchase. Any notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name(s) in which the certificate(s) representing such Shares are registered, if different from that of the person who tendered such Shares. If certificates for Shares to be withdrawn have been delivered or otherwise identified to the Depositary, the name of the registered holder and the serial numbers shown on the particular certificate evidencing the Shares to be withdrawn must also be furnished to the Depositary prior to the physical release of the Shares to be withdrawn. The signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution (as defined in the Offer to Purchase) (except in the case of Shares tendered by an Eligible Institution). If Shares have been tendered pursuant to the procedures for book-entry transfer, any notice of withdrawal must specify the name and number of the account at DTC to be credited with such withdrawn Shares and must otherwise comply with DTC's procedures. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by Purchaser, in its sole discretion, and its determination will be final and binding on all parties. The information required to be disclosed by paragraph (d)(1) of Rule 14d-6 of the General Rules and Regulations under the Exchange Act is contained in the Offer to Purchase and is incorporated herein by reference. In connection with the Offer, the Company has provided Purchaser with the names and addresses of all record holders of Shares and security position listings of Shares held in stock depositories. The Offer to Purchase, the related Letter of Transmittal and other related materials will be mailed to registered holders of Shares and will be furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the Company's stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. The Offer to Purchase and the related Letter of Transmittal contain important information that should be read carefully before any decision is made with respect to the Offer. Any questions or requests for assistance or for additional copies of the Offer to Purchase, the related Letter of Transmittal and other related tender offer materials may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth below, and copies will be furnished promptly at Purchaser's expense. Purchaser will not pay any fees or commissions to any broker or dealer or any other person (other than the Dealer Manager, the Depositary and the Information Agent) in connection with the solicitation of tenders of Shares pursuant to the Offer. The Information Agent for the Offer is: Georgeson Shareholder Communications Inc. LOGO 17 State Street, 10th Floor New York, New York 10004 Brokers and Bankers Call Collect (212) 440-9800 or All Others Call Toll Free (800) 223-2064 The Dealer Manager for the Offer is: Credit Suisse First Boston LOGO Eleven Madison Avenue New York, NY 10010-3629 Call Toll Free: (800) 881-8320 February 29, 2000 EX-99.(A)(1)(H) 9 PRESS RELEASE News Release: MEDIA CONTACTS: James Lee, 914-397-1565, or Jack Cox, 914-397-1952 ANALYST CONTACTS: Carol Tutundgy, 914-397-1632; Rochelle Weitzner, 914-397-1623 INTERNATIONAL PAPER REACHES AGREEMENT TO BUY SHOREWOOD PACKAGING Thursday, February 17, 2000 Purchase, New York - International Paper (NYSE: IP) agreed to acquire Shorewood Packaging Corporation (NYSE: SWD) in a move that will create the premiere retail packaging company. The all cash transaction values Shorewood at $21 per share. Shorewood produces premium packaging for entertainment, cosmetic, personal care and other consumer products. "Shorewood is the recognized leader in the fast growing, premium retail packaging market," noted IP Chairman and Chief Executive Officer John Dillon. "This acquisition complements our leading position in bleached board and strengthens our existing retail packaging business. Shorewood is a premiere franchise with a reputation for high quality, value added products and outstanding customer service." International Paper intends to launch a tender offer promptly for all shares of Shorewood stock at $21 per share, or approximately $600 million. International Paper would also assume approximately $275 million in Shorewood debt. The Boards of Directors of both companies have unanimously approved the transaction. For the 12-month period ended October 1999, Shorewood had sales of approximately $600 million, operating cash flow of approximately $90 million and operating income of approximately $62 million. Retail Packaging is the largest segment of International Paper's Consumer Packaging sector, including the sale of bleached board for packaging applications and the manufacture of retail packaging products at 10 plants in the United States. The companies will combine their premium retail packaging operations into a single business to be operated under the Shorewood name. Sales of the new business are projected to be in excess of $750 million. Shorewood is well positioned in the entertainment segment, an area that is presently growing faster than other retail packaging segments. One third of the company's sales are in this segment, with growth driven by sales of computer software and broader distribution of music, video and other software products. "Consumer Packaging is a core business for International Paper. The acquisition of Shorewood is a very significant step in our efforts to deliver more value to our customers," noted William Slowikowski, Senior Vice President - Consumer Packaging for International Paper. "This combination also helps us meet our goals of improving our position in premium packaging and capturing maximum value from our bleached board system. With International Paper's world class bleached board system and Shorewood's leadership in packaging, we will be well 3 positioned to provide high quality products and services to customers within the growing premium packaging segment." "I look forward to the opportunity to lead the expansion of premium retail packaging and to continue Shorewood's tradition of excellence at International Paper," said Marc Shore, Chairman and CEO of Shorewood. International Paper anticipates annual cost savings of $25 million from the combination as a result of integrating operations, reductions in duplicate overhead costs and improved purchasing efficiencies. Including the identified cost savings, the acquisition of Shorewood is expected to be additive to International Paper's earnings in the first year. The acquisition is subject to regulatory approval. The transaction is expected to close by the end of March. International Paper (www.internationalpaper.com) is the world's largest paper and forest products company. Businesses include printing papers, packaging, building materials, chemical products and distribution. As the largest private landowner in the U.S., the company manages its forest under the principles of the Sustainable Forestry Initiative (SFISM) program, a system that ensures the perpetual growing and harvesting of trees while protecting wildlife, plants, soil, air and water quality. Headquartered in the United States at Purchase, N.Y., International Paper has operations in nearly 50 countries, employs nearly 100,000 people and exports its products to more than 130 nations. Shorewood Packaging Corporation is a leading value-added provider of high quality printing and paperboard packaging for the computer software, cosmetics and toiletries, food, home video, music, tobacco and general consumer markets in North America and China, with 16 plants in the United States, Canada and China. #### This release contains certain forward-looking statements relating to projections of sales and savings. These projections might not materialize if combined sales do not continue at about the same rate or greater than in 1999 or we are unable to achieve the savings we presently anticipate. THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER TO SELL SHARES OF THE COMPANY. AT THE TIME THE OFFER IS COMMENCED, INTERNATIONAL PAPER WILL FILE A TENDER OFFER STATEMENT WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION AND SHOREWOOD PACKAGING WILL FILE A SOLICITATION/RECOMMENDATION STATEMENT WITH RESPECT TO THE OFFER. THE TENDER OFFER STATEMENT (INCLUDING AN OFFER TO PURCHASE, A RELATED LETTER OF TRANSMITTAL AND OTHER OFFER DOCUMENTS) AND THE SOLICITATION/RECOMMENDATION STATEMENT WILL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. THE OFFER TO PURCHASE, THE RELATED LETTER OF TRANSMITTAL AND CERTAIN OTHER OFFER DOCUMENTS, AS WELL AS THE SOLICITATION/RECOMMENDATION STATEMENT, WILL BE MADE AVAILABLE TO ALL STOCK HOLDERS OF SHOREWOOD PACKAGING, AT NO EXPENSE TO THEM. THE TENDER OFFER STATEMENT (INCLUDING THE OFFER TO PURCHASE, THE RELATED LETTER OF TRANSMITTAL AND ALL OTHER OFFER DOCUMENTS FILED WITH THE COMMISSION) AND THE SOLICITATION/RECOMMENDATION STATEMENT WILL ALSO BE AVAILABLE AT NO CHARGE AT THE COMMISSION'S WEBSITE AT WWW.SEC.GOV. 4 EX-99.(D)(1) 10 AGREEMENT & PLAN OF MERGER AGREEMENT AND PLAN OF MERGER BY AND AMONG INTERNATIONAL PAPER COMPANY, INTERNATIONAL PAPER - 37, INC. AND SHOREWOOD PACKAGING CORPORATION DATED AS OF FEBRUARY 16, 2000
TABLE OF CONTENTS Page ARTICLE I THE OFFER 1.1 The Offer.................................................................1 1.2 Company Action............................................................3 1.3 Directors.................................................................5 ARTICLE II THE MERGER 2.1 The Merger................................................................6 2.2 Effective Time............................................................6 2.3 Closing of the Merger.....................................................7 2.4 Effects of the Merger.....................................................7 2.5 Certificate of Incorporation and By-laws..................................7 2.6 Directors.................................................................7 2.7 Officers..................................................................7 2.8 Conversion of Shares......................................................7 2.9 Delivery of Merger Consideration..........................................7 2.10 Dissenting Shares.........................................................9 2.11 Treatment of Company Options and Stock Units.............................10 2.12 Adjustments..............................................................10 2.13 Stockholders' Meeting....................................................10 2.14 Merger Without Meeting of Stockholders...................................11 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY 3.1 Existence; Good Standing; Corporate Authority............................11 3.2 Authorization, Validity and Effect of Agreements.........................12 3.3 Capitalization...........................................................12 3.4 Subsidiaries.............................................................13 3.5 Other Interests..........................................................13 3.6 No Conflict; Required Filings and Consents...............................14 3.7 Compliance; Permits......................................................15 3.8 SEC Documents............................................................15
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TABLE OF CONTENTS Page 3.9 Financial Statements; Undisclosed Liabilities............................16 3.10 Absence of Certain Changes...............................................16 3.11 Material Contracts.......................................................17 3.12 Litigation...............................................................18 3.13 Taxes....................................................................18 3.14 Employee Benefit Plans...................................................19 3.15 Labor and Employment Matters.............................................21 3.16 No Brokers...............................................................21 3.17 Properties...............................................................21 3.18 Environmental Laws.......................................................22 3.19 Related Party Transactions...............................................24 3.20 Intellectual Property....................................................24 3.21 State Takeover Statutes Inapplicable.....................................25 3.22 Product Liability........................................................25 3.23 Opinions of Financial Advisors...........................................25 3.24 Rights Agreement.........................................................25 3.25 Full Disclosure..........................................................25 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER 4.1 Existence; Good Standing; Corporate Authority............................26 4.2 Authorization, Validity and Effect of Agreements.........................26 4.3 No Conflict; Required Filings and Consents...............................27 4.4 No Brokers...............................................................28 4.5 Full Disclosure..........................................................28 4.6 No Prior Activities......................................................28 4.7 Financing................................................................28 ARTICLE V COVENANTS 5.1 Conduct of Business by the Company Pending the Merger....................29 5.2 No Solicitation..........................................................31 5.3 Access to Information; Confidentiality...................................33
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TABLE OF CONTENTS Page 5.4 Consents; Approvals......................................................33 5.5 Indemnification and Insurance............................................33 5.6 Employee Benefits........................................................35 5.7 Notification of Certain Matters..........................................35 5.8 Further Action...........................................................36 5.9 Public Announcements.....................................................36 5.10 Financial Information....................................................36 ARTICLE VI CONDITIONS TO THE MERGER 6.1 Offer....................................................................36 6.2 Stockholder Approval.....................................................36 6.3 No Injunction or Action..................................................36 6.4 Governmental Approval....................................................37 ARTICLE VII TERMINATION 7.1 Termination..............................................................37 7.2 Effect of Termination....................................................39 7.3 Fees and Expenses........................................................39 ARTICLE VIII GENERAL PROVISIONS 8.1 Nonsurvival of Representations, Warranties and Agreements................40 8.2 Notices..................................................................41 8.3 Assignment; Binding Effect...............................................41 8.4 Entire Agreement.........................................................41 8.5 Amendment................................................................42 8.6 Governing Law; Consent to Jurisdiction...................................42 8.7 Counterparts.............................................................42 8.8 Headings.................................................................42 8.9 Interpretation...........................................................42
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TABLE OF CONTENTS Page 8.10 Waivers..................................................................43 8.11 Incorporation of Exhibits................................................43 8.12 Severability.............................................................43 8.13 Enforcement of Agreement.................................................43 8.14 Waiver of Jury Trial.....................................................44 8.15 Company Disclosure Letter................................................44 8.16 Execution................................................................44 8.17 Personal Liability.......................................................44 8.18 Date for any Action......................................................44 8.19 Obligation of Parent and the Company.....................................44 8.20 Certain Definitions......................................................44
Annex A iv Exhibit 2 AGREEMENT AND PLAN OF MERGER This AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") dated as of February 16, 2000, is by and among International Paper Company, a New York corporation ("PARENT"), International Paper-37, Inc., a Delaware corporation and a direct wholly owned subsidiary of Parent ("PURCHASER"), and Shorewood Packaging Corporation, a Delaware corporation (the "COMPANY"). RECITALS WHEREAS, the Company and Parent have determined to engage in the transactions (the "TRANSACTIONS") contemplated by this Agreement, including (a) the commencement of an Offer (as defined below) by Purchaser to purchase for cash all of the outstanding shares of common stock, $.01 par value, of the Company ("COMPANY COMMON STOCK") together with the associated rights to purchase preferred stock (the "RIGHTS"), issued pursuant to the Rights Agreement, dated as of June 12, 1995 (the "RIGHTS AGREEMENT"), between the Company and The Bank of New York, and (b) a business combination whereby Purchaser will be merged with and into the Company in accordance with the Delaware General Corporation Law (the "DGCL"), with the Company continuing as the surviving corporation of such merger and a direct wholly-owned subsidiary of Parent (the "MERGER"); WHEREAS, the respective boards of directors of the Company, Parent and Purchaser have each approved and declared advisable this Agreement and the Transactions; WHEREAS, the Board of Directors of the Company (the "BOARD") (i) has determined that the Merger is advisable and in the best interests of the Company and its stockholders, (ii) has approved the Merger, the Offer, this Agreement and the other transactions contemplated hereby and (iii) recommends that the Company's stockholders adopt this Agreement and the Merger and that the Company's stockholders tender their shares pursuant to the Offer; and WHEREAS, the Company, Parent and Purchaser desire to make certain representations, warranties, covenants and agreements in connection with the Offer and the Merger and also to prescribe various conditions to the Offer and the Merger. NOW, THEREFORE, in consideration of the premises and of the mutual covenants, representation, warranties and agreements contained herein, the parties hereto agree as follows: ARTICLE I THE OFFER 1.1 THE OFFER. (a) Provided that this Agreement shall not have been terminated in accordance with Article VII and none of the events set forth in ANNEX A hereto shall have occurred or be existing, Purchaser shall, and Parent shall cause Purchaser to, as promptly as practicable after the date hereof (but in no event later than the tenth business day after the public announcement of the terms of this Agreement), commence (within the meaning of Rule 14d-2(a) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT")), an offer (the "OFFER") to purchase any and all of the outstanding shares of Company Common Stock (and associated Rights) at a price of Twenty-One United States Dollars ($21.00) per share and associated Right (the "OFFER PRICE"), net to the seller in cash, subject to reduction for any applicable withholding taxes and, but only if such payment is to be made other than to the registered holder, any applicable stock transfer taxes payable by such holder. The Offer will be made pursuant to an Offer to Purchase and related Letter of Transmittal containing the terms and conditions set forth in this Agreement. The initial expiration date of the Offer shall be the twentieth business day from and after the date the Offer is commenced (the "INITIAL EXPIRATION DATE"). The obligation of Purchaser to accept for payment, purchase and pay for any shares of Company Common Stock (and associated Rights) tendered pursuant to the Offer shall be subject, except as provided in Section 1.1(b), only to the satisfaction of (i) the condition that a number of shares of Company Common Stock representing not less than fifty-one percent (51%) of the total issued and outstanding shares of Company Common Stock on a fully-diluted basis (after giving effect to the conversion or exercise of all outstanding options, warrants and other rights or securities convertible into shares of Company Common Stock) (excluding any shares of Company Common Stock held by the Company or any of its Subsidiaries) on the date such shares are purchased pursuant to the Offer have been validly tendered and not withdrawn prior to the expiration of the Offer (the "MINIMUM CONDITION") and (ii) the other conditions set forth in ANNEX A hereto; PROVIDED, HOWEVER, that Purchaser expressly reserves the right to waive any of the conditions to the Offer (other than the Minimum Condition) and to make any change in the terms or conditions of the Offer in its sole discretion, subject to Section 1.1(b). (b) Without the prior written consent of the Company, neither Parent nor Purchaser will (i) decrease the price per share of Company Common Stock payable in the Offer, (ii) decrease the number of shares of Company Common Stock sought in the Offer, (iii) change the form of consideration payable in the Offer, (iv) impose conditions to the Offer in addition to those set forth in ANNEX A, (v) except as provided below or required by any rule, regulation, interpretation or position of the Securities and Exchange Commission (the "SEC") applicable to the Offer, change the expiration date of the Offer, or (vi) otherwise amend or change any term or condition of the Offer in a manner adverse to the holders of shares of Company Common Stock. Notwithstanding anything in this Agreement to the contrary, without the consent of the Company, Purchaser shall have the right to extend the Offer beyond the Initial Expiration Date in the following events: (i) from time to time if, at the Initial Expiration Date (or extended expiration date of the Offer, if applicable), any of the conditions to the Offer (other than the Minimum Condition to which this clause does not apply) shall not have been satisfied or waived, until such conditions are satisfied or waived; (ii) for any period required by any rule, regulation, interpretation or position of the SEC or the staff thereof applicable to the Offer or any period required by applicable law; (iii) if all conditions to the Offer (other than the Minimum Condition) are satisfied or waived, but the Minimum Condition has not been satisfied, for one or more periods not to exceed thirty (30) business days (for all such extensions); or (iv) if all of the conditions to the Offer are satisfied or waived but the number of shares of Company Common Stock validly tendered and not withdrawn is less than ninety percent (90%) of the then outstanding number of shares of Company Common Stock on a fully diluted basis, for an aggregate period not to exceed twenty (20) business days (for all such extensions), PROVIDED that 2 Purchaser shall accept and promptly pay for all securities tendered prior to the date of such extension and shall otherwise meet the requirements of Rule 14d-11 under the Exchange Act in connection with each such extension. In addition, Parent and Purchaser agree that Purchaser shall from time to time extend the Offer, if requested by the Company, (i) if at the Initial Expiration Date (or any extended expiration date of the Offer, if applicable), any of the conditions to the Offer other than (or in addition to) the Minimum Condition shall not have been waived or satisfied, until (taking into account all such extensions) the earlier of June 30, 2000 or such earlier date upon which any such condition (other than the Minimum Condition) shall not be reasonably capable of being satisfied prior to June 30, 2000; or (ii) if at the Initial Expiration Date (or any extended expiration date of the Offer, if applicable), all of the conditions to the Offer other than the Minimum Condition shall have been waived or satisfied and the Minimum Condition shall not have been satisfied, until the earlier of ten (10) business days after such expiration date or June 30, 2000. Upon the prior satisfaction or waiver of all the conditions to the Offer, and subject to the terms and conditions of this Agreement, Purchaser will, and Parent will cause Purchaser to, accept for payment, purchase and pay for, in accordance with the terms of the Offer, all shares of Company Common Stock validly tendered and not withdrawn pursuant to the Offer as soon as reasonably practicable after the expiration of the Offer. (c) As soon as reasonably practicable on the date of commencement of the Offer, Parent and Purchaser shall file or cause to be filed with the SEC a Tender Offer Statement on Schedule TO (together with any amendments or supplements thereto, the "SCHEDULE TO") with respect to the Offer. The Schedule TO will comply as to form and content in all material respects with the applicable provisions of the federal securities laws and will contain the offer to purchase and form of the related letter of transmittal (such Schedule TO and such documents included therein pursuant to which the Offer will be made, together with any supplements or amendments thereto, the "OFFER DOCUMENTS"). Parent and the Company each agrees to correct promptly any information provided by it for use in the Offer Documents if and to the extent that such information shall have become false or misleading in any material respect and to supplement the information provided by it specifically for use in the Schedule TO or the other Offer Documents to include any information that shall become necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Parent and Purchaser agree to take all steps necessary to cause the Offer Documents as so corrected or supplemented to be filed with the SEC and be disseminated to holders of shares of Company Common Stock, in each case, as and to the extent required by applicable federal securities laws. The Company and its counsel shall be given a reasonable opportunity to review and comment on the Offer Documents prior to their being filed with the SEC. Parent and Purchaser agree to provide to the Company and its counsel any comments or other communications which Parent, Purchaser or their counsel may receive from the Staff of the SEC with respect to the Offer Documents promptly after receipt thereof. 1.2 COMPANY ACTION. (a) The Company hereby consents to the Offer and represents and warrants that the Board, at a meeting duly called and held has (i) unanimously determined that this Agreement and the Transactions, including the Offer, the Merger, and the purchase of shares of Company Common Stock and associated Rights contemplated by the Offer, are advisable and fair to and in the best interests of the Company and the Company's stockholders, 3 (ii) unanimously approved and adopted this Agreement, certain agreements with stockholders of the Company being entered into in connection herewith and the Transactions, including the Offer, the Merger, and the purchase of shares of Company Common Stock and associated Rights contemplated by the Offer, in accordance with the requirements of the DGCL, which approval satisfies in full the requirements of prior approval contained in Section 203(a)(1) of the DGCL, (iii) unanimously resolved to recommend that the stockholders of the Company accept the Offer, tender their shares of Company Common Stock and associated Rights pursuant to the Offer and approve and adopt this Agreement and the Merger and (iv) unanimously resolved to amend the Rights Agreement as contemplated herein. The Company hereby consents to the inclusion in the Offer Documents, the Schedule 14D-9 (as defined below) and the Proxy Statement (as defined below) (if any) of such recommendation of the Board. The Company represents that (1) a special committee of the Board (the "SPECIAL COMMITTEE") and the Board have received the written opinion (the "GREENHILL FAIRNESS OPINION") of Greenhill & Co., LLC ("GREENHILL") and (2) the Board has received the written opinion (the "BEAR STEARNS FAIRNESS OPINION") of Bear, Stearns & Co. Inc. ("BEAR STEARNS"), in each case stating that the proposed consideration to be received by the holders of shares of Company Common Stock pursuant to the Offer and the Merger is fair to such holders from a financial point of view. The Company has been authorized by (1) Greenhill to permit, subject to the prior review and consent by Greenhill (such consent not to be unreasonably withheld), the inclusion of the Greenhill Fairness Opinion (or a reference thereto) in the Offer Documents and the Schedule 14D-9 and (2) by Bear Stearns to permit, subject to the prior review and consent by Bear Stearns (such consent not to be unreasonably withheld), the inclusion of the Bear Stearns Fairness Opinion (or a reference thereto) in the Offer Documents and the Schedule 14D-9. The Company has been advised by each of its directors and by each executive officer of the Company who as of the date hereof is actually aware (to the knowledge of the Company) of the Transactions that each such person intends to tender pursuant to the Offer all Shares owned by such person. (b) The Company will cause its transfer agent to promptly furnish Parent and Purchaser with a list of the Company's stockholders, mailing labels and any available listing or computer file containing the names and addresses of all record holders of shares of Company Common Stock and lists of securities positions of shares of Company Common Stock held in stock depositories and to provide to Parent and Purchaser such additional information (including, without limitation, updated lists of stockholders, mailing labels and lists of securities positions) and such other assistance as Parent or Purchaser or their agents may reasonably request in connection with the Offer. Subject to the requirements of applicable law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Transactions, Parent and Purchaser and each of their affiliates, associates and agents will hold in confidence the information contained in any such labels, listings and files, will use such information only in connection with the Offer and the Merger and, if this Agreement is terminated, will deliver, and will use their reasonable efforts to cause their agents to deliver, to the Company all copies and any extracts or summaries from such information then in their possession or control. (c) As soon as reasonably practicable on the date of commencement of the Offer, the Company shall file with the SEC and disseminate to holders of shares of Company Common Stock, in each case as and to the extent required by applicable federal securities laws, a Solicitation/Recommendation Statement on Schedule 14D-9 (together with any amendments or 4 supplements thereto, the "SCHEDULE 14D-9") that shall reflect the recommendations of the Board referred to above. The Company and Parent each agrees promptly to correct any information provided by it for use in the Schedule 14D-9 if and to the extent that it shall have become false or misleading in any material respect and to supplement the information provided by it specifically for use in the Schedule 14D-9 to include any information that shall become necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The Company agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected or supplemented to be filed with the SEC and to be disseminated to holders of shares of Company Common Stock, in each case, as and to the extent required by applicable federal securities laws. Parent and its counsel shall be given a reasonable opportunity to review and comment on the Schedule 14D-9 prior to its being filed with the SEC. The Company agrees to provide to Parent and Purchaser and their counsel with any comments or other communications which the Company or its counsel may receive from the Staff of the SEC with respect to the Schedule 14D-9 promptly after receipt thereof. Parent, Purchaser and the Company each hereby agree to provide promptly such information necessary to the preparation of the exhibits and schedules to the Schedule 14D-9 and the Offer Documents which the respective party responsible therefor will reasonably request. 1.3 DIRECTORS. (a) Promptly following the purchase of and payment for a number of shares of Company Common Stock that satisfies the Minimum Condition, and from time to time thereafter, Purchaser shall be entitled to designate the number of directors, rounded up to the next whole number, on the Board that equals the product of (i) the total number of directors on the Board (giving effect to the election of any additional directors pursuant to this Section) and (ii) the percentage that the number of shares of Company Common Stock beneficially owned by Parent and Purchaser (including shares of Company Common Stock paid for pursuant to the Offer), upon such acceptance for payment, bears to the total number of shares of Company Common Stock outstanding, and the Company shall take all action within its power to cause Purchaser's designees to be elected or appointed to the Board, including, without limitation, increasing the number of directors, and seeking and accepting resignations of incumbent directors. At such time, the Company will also use its best efforts to cause individual directors designated by Purchaser to constitute the number of members, rounded up to the next whole number, on (i) each committee of the Board other than any such committee of such board established to take action under this Agreement and (ii) each board of directors of each Subsidiary (as defined below) of the Company, and each committee thereof, that represents the same percentage as such individuals represent on the Board. Notwithstanding the foregoing, in the event that Purchaser's designees are to be appointed or elected to the Board, until the Effective Time (as defined below), such board of directors shall have at least two directors who are directors on the date of this Agreement and who are not officers of the Company (the "CONTINUING DIRECTORS"); provided that in the event that the number of Continuing Directors shall be reduced below two for any reason whatsoever, any remaining Continuing Directors (or Continuing Director, if there shall be only one remaining) shall be entitled to designate persons to fill such vacancies who shall be deemed to be Continuing Directors for purposes of this Agreement. As used in this Agreement, the term "SUBSIDIARY" when used with respect to any party means any corporation or other organization, whether incorporated or unincorporated, of which such party directly or indirectly owns or controls at least a majority of the securities or 5 other interests having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions with respect to such corporation or other organization, or any organization of which such party is a general partner. (b) The Company's obligations to appoint Purchaser's designees to the Board shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. The Company shall promptly take all actions, and shall include in the Schedule 14D-9 such information with respect to the Company and its officers and directors, as Section 14(f) and Rule 14f-1 require in order to fulfill its obligations under this Section. Parent and Purchaser shall supply to the Company, and be solely responsible for, any information with respect to themselves and their nominees, officers, directors and affiliates required by Section 14(f) and Rule 14f-1. (c) Following the election or appointment of Purchaser's designees pursuant to Section 1.3(a) and until the Effective Time, the approval of the Continuing Directors shall be required to authorize (and such authorization shall constitute the authorization of the Company's board of directors and no other action on the part of the Company, including any action by any other director of the Company, shall be required to authorize) any termination of this Agreement by the Company, any amendment of this Agreement requiring action by the Company's board of directors, any amendment of the certificate of incorporation or bylaws of the Company, any extension of time for performance of any obligation or action hereunder by Parent or Purchaser, any waiver of compliance with any of the agreements or conditions contained herein for the benefit of the Company and any material transaction with Parent, Purchaser or any affiliate thereof. ARTICLE II THE MERGER 2.1 THE MERGER. At the Effective Time (as defined in Section 2.2 below) and upon the terms and subject to the conditions of this Agreement and in accordance with the DGCL, Purchaser will be merged with and into the Company. Following the Merger, the Company will continue as the surviving corporation (the "SURVIVING CORPORATION") and as a wholly owned subsidiary of Parent, and the separate corporate existence of Purchaser will cease in accordance with the DGCL. Subject to the terms and conditions of this Agreement, Parent and Purchaser agree to use all reasonable efforts to cause the Effective Time to occur as soon as practicable after the Stockholder Meeting with respect to the Merger or the purchase by Purchaser of 90% or more of the outstanding shares of Company Common Stock pursuant to the Offer. 2.2 EFFECTIVE TIME. Subject to the provisions of this Agreement, the parties will cause the Merger to be consummated by filing an appropriate certificate of merger (the "CERTIFICATE OF MERGER") with the Secretary of State of the State of Delaware in such form as required by, and executed in accordance with, the relevant provisions of the DGCL as soon as practicable on or after the Closing Date (as defined in Section 2.3 below). The Merger will become effective upon such filing or at such time thereafter as is provided in the Certificate of Merger (the "EFFECTIVE TIME," and the date of such effectiveness shall be the "EFFECTIVE DATE"). 6 2.3 CLOSING OF THE MERGER. The closing of the Merger (the "CLOSING") will take place on a date and at a place in New York, New York to be specified by the parties, which shall be no later than the second business day after satisfaction or waiver (as permitted by this Agreement and applicable law) of all of the conditions set forth in ARTICLE VI hereof (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the fulfillment or waiver of those conditions) (the "CLOSING DATE"), unless the parties agree to another time, date or place in writing. 2.4 EFFECTS OF THE MERGER. The Merger will have the effects set forth in the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, all properties, rights, privileges, powers and franchises of the Company and Purchaser will vest in the Surviving Corporation, and all debts, liabilities and duties of the Company and Purchaser will become the debts, liabilities and duties of the Surviving Corporation. 2.5 CERTIFICATE OF INCORPORATION AND BY-LAWS. Subject to the provisions of Section 5.5, the certificate of incorporation and bylaws of Purchaser in effect immediately prior to the Effective Time will be the certificate of incorporation and bylaws of the Surviving Corporation until respectively amended in accordance with their terms and applicable law. 2.6 DIRECTORS. The directors of Purchaser at the Effective Time will be the initial directors of the Surviving Corporation, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation until such director's successor is duly elected and qualified. 2.7 OFFICERS. The officers of the Company as of the Effective Time will be the initial officers of the Surviving Corporation until such officer's successor is duly elected or appointed and qualified. 2.8 CONVERSION OF SHARES. At the Effective Time and without any action on the part of the holder thereof, subject to Section 2.10, each issued and outstanding share of Company Common Stock will convert into the right to receive an amount in cash, without interest, equal to Twenty-One United States Dollars ($21.00) (the "MERGER CONSIDERATION"). As a result of the Merger, each issued and outstanding share of common stock of Purchaser will be converted into and become one fully paid and non-assessable share of common stock of the Surviving Corporation. Notwithstanding anything contained in this Section 2.8 to the contrary, each share of Company Common Stock issued and held in the Company's treasury immediately before the Effective Time, and each share of Company Common Stock held by Parent, Purchaser, any other Subsidiary of Parent or any Subsidiary of the Company immediately before the Effective Time, will, by virtue of the Merger, cease to be outstanding and will be cancelled and retired without payment of any consideration therefor. 2.9 DELIVERY OF MERGER CONSIDERATION. (a) Promptly after the Effective Time, Parent shall deposit or cause to be deposited in trust (the "PAYMENT FUND") with an agent designated by Parent (the "PAYMENT AGENT") for the benefit of the holders of certificates representing the shares of Company Common Stock issued and outstanding as of the Effective Time (collectively "CERTIFICATES"), the 7 aggregate Merger Consideration, as and when needed, to be paid in respect of the shares of Company Common Stock. The Payment Fund shall not be used for any other purpose. The Payment Fund may be invested by the Payment Agent, as directed by Surviving Corporation, in (i) obligations of or guaranteed by the United States, (ii) commercial paper rated A-1, P-1 or A-2, P-2, and (iii) certificates of deposit, bank repurchase agreements and bankers acceptances of any bank or trust company organized under federal law or under the law of any state of the United States or of the District of Columbia that has capital, surplus and undivided profits of at least $1 billion or in money market funds which are invested substantially in such investments. Any net earnings with respect thereto shall be paid to the Surviving Corporation as and when requested by the Surviving Corporation. (b) As soon as reasonably practicable after the Effective Time, Parent will instruct the Payment Agent to mail to each holder of record of Company Common Stock immediately before the Effective Time (excluding any shares of Company Common Stock cancelled pursuant to Section 2.8): (1) a letter of transmittal (the "LETTER OF TRANSMITTAL") (which will specify that delivery will be effected, and risk of loss and title to the Certificates will pass, only upon delivery of such Certificates to the Payment Agent and will be in such form and have such other provisions as Parent reasonably specifies), and (2) instructions for use in effecting the surrender of each Certificate in exchange for the aggregate Merger Consideration with respect to the shares of Company Common Stock formerly represented thereby. (c) Parent and the Surviving Corporation shall cause the Payment Agent to pay to the holders of a Certificate, as soon as practicable after receipt of any Certificate (or in lieu of any such Certificate which has been lost, stolen or destroyed, an affidavit of lost, stolen or destroyed share certificates (including customary indemnity or bond against loss) in form and substance reasonably satisfactory to Parent) together with the Letter of Transmittal, duly executed, and such other documents as Parent or the Payment Agent reasonably request, in exchange therefor a check in the amount equal to the cash, if any, which such holder has the right to receive pursuant to the provisions of this ARTICLE II. No interest shall be paid or accrued on any cash payable upon the surrender of any Certificate. Each Certificate surrendered in accordance with the provisions of this Section 2.9(c) shall be cancelled forthwith. (d) In the event of a transfer of ownership of shares of Company Common Stock which is not registered in the transfer records of the Company, the Merger Consideration may be paid to the transferee only if (i) the Certificate representing such shares of Company Common Stock surrendered to the Payment Agent in accordance with Section 2.9(c) hereof is properly endorsed for transfer or is accompanied by appropriate and properly endorsed stock powers and is otherwise in proper form to effect such transfer, (ii) the person requesting such transfer pays to the Payment Agent any transfer or other taxes payable by reason of such transfer or establishes to the satisfaction of the Payment Agent that such taxes have been paid or are not required to be paid, and (iii) such person establishes to the reasonable satisfaction of Parent that such transfer would not violate any applicable federal or state securities laws. 8 (e) At and after the Effective Time, each holder of a Certificate that represented issued and outstanding shares of Company Common Stock immediately prior to the Effective Time shall cease to have any rights as a stockholder of the Company, except for the right to surrender his or her Certificate in exchange for the Merger Consideration multiplied by the number of shares represented by such Certificate and except as otherwise provided by applicable law, and no transfer of shares of Company Common Stock shall be made on the stock transfer books of the Surviving Corporation. If, after the Effective Time, Certificates are presented to the Surviving Corporation or the Payment Agent for any reason, they will be canceled and exchanged as provided in this ARTICLE II, except as otherwise provided by applicable law. (f) The Merger Consideration paid in the Merger shall be net to the holder of shares of Company Common Stock in cash, and without interest thereon, subject to reduction only for any applicable withholding taxes and, but only if the Merger Consideration is to be paid other than to the registered holder, any applicable stock transfer taxes payable by such holder. (g) Promptly following the date which is one year after the Effective Time, the Payment Agent shall deliver to the Surviving Corporation all cash, certificates and other documents in its possession relating to the transactions contemplated hereby, and the Payment Agent's duties shall terminate. Thereafter, each holder of a certificate representing shares of Company Common Stock (other than certificates representing Dissenting Shares) may surrender such certificate to the Surviving Corporation and (subject to any applicable abandoned property, escheat or similar law) receive in consideration therefor the aggregate Merger Consideration relating thereto, without any interest thereon. Notwithstanding the foregoing, none of Parent, the Surviving Corporation, the Company or the Payment Agent shall be liable to a holder of a Certificate for any Merger Consideration properly delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. (h) Any portion of the Merger Consideration made available to the Payment Agent pursuant to Section 2.9(a) to pay for shares of Company Common Stock for which appraisal rights have been perfected shall be returned to Parent upon demand. 2.10 DISSENTING SHARES . Notwithstanding anything in this Agreement to the contrary, shares of Company Common Stock that are issued and outstanding immediately before the Effective Time and that are held by stockholders who have not voted in favor of the Merger or consented thereto in writing and who have properly exercised appraisal rights with respect thereto in accordance with Section 262 of the DGCL (insofar as such Section is applicable to the Merger and provides for appraisal rights with respect to it), shall not be converted into the right to receive the Merger Consideration as provided in Section 2.8 hereof, unless such holders fail to perfect or withdraw or otherwise lose their rights to appraisal. Instead, ownership of such shares will entitle the holder thereof to receive the consideration determined pursuant to Section 262 of the DGCL; PROVIDED, HOWEVER, that if such holder fails to perfect or effectively withdraws such holder's right to appraisal and payment under the DGCL, each of such shares shall thereupon be deemed to have been converted, at the Effective Time, into the right to receive the Merger Consideration, without any interest thereon, upon surrender of the Certificate or Certificates in the manner provided in Section 2.8 hereof. The Company will give Parent (a) prompt notice of any demands (or withdrawals of demands) for appraisal received by the Company pursuant to the 9 applicable provisions of the DGCL and any other instruments served pursuant to the DGCL and received by the Company and (b) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under the DGCL. The Company will not, except with the prior consent of Parent, make any payment with respect to any such demands for appraisal or offer to settle, or settle, any such demands. 2.11 TREATMENT OF COMPANY OPTIONS AND STOCK UNITS. (a) Prior to the Initial Expiration Date, the Company shall take all actions necessary and appropriate to provide that, upon the Effective Time, each outstanding option to purchase shares or other similar interest (collectively, the "OPTIONS") granted under any of the Company's stock option plans or under any other plan or arrangement (the "OPTION PLANS") and each outstanding warrant to purchase shares described in Section 3.3(b) of the Company Disclosure Letter (collectively, the "WARRANTS"), whether or not then exercisable or vested, shall be cancelled and, in exchange therefor, each holder of such Option or Warrant shall receive an amount in cash in respect thereof, if any, equal to the product of (i) the excess, if any, of the Merger Consideration over the per share exercise price thereof and (ii) the number of shares subject thereto (such payment to be net of applicable withholding taxes). (b) Prior to the Initial Expiration Date, the Company shall take all actions necessary and appropriate to provide that, upon the Effective Time, each outstanding stock unit granted pursuant to the Company's Incentive Program for Canadian Employees shall become vested and shall be cancelled, and in exchange therefor, each holder thereof shall be entitled to receive the Merger Consideration (such payment to be net of applicable withholding taxes). (c) The Company shall use its reasonable best efforts to obtain all necessary waivers, consents or releases from holders of Options, Warrants and stock units and shall take any such action as may be reasonably necessary to give effect to, and to accomplish the transactions contemplated by, this Section 2.11. 2.12 ADJUSTMENTS. If, during the period between the date of this Agreement and the Effective Time, any change in the outstanding shares of Company Common Stock shall occur, including by reason of any reclassification, recapitalization, stock split or combination, exchange or readjustment of shares of Company Common Stock, or stock dividend thereon with a record date during such period, the cash payable pursuant to the Offer, the Merger Consideration and any other amounts payable pursuant to this Agreement shall be appropriately adjusted. 2.13 STOCKHOLDERS' MEETING. If required by applicable law to consummate the Merger, the Company, acting through the Board , shall, in accordance with and to the extent permitted by applicable law: (a) duly call, give notice of, convene and hold a special meeting of its stockholders (the "STOCKHOLDERS MEETING") as soon as practicable following the date on which Purchaser completes the purchase of shares of Company Common Stock pursuant to the Offer (the "OFFER COMPLETION DATE") for the purpose of considering and taking action upon this Agreement; 10 (b) subject to its fiduciary duties under applicable law, include in the Proxy Statement (as defined below) the recommendation of the Board that stockholders of the Company vote in favor of the approval and adoption of this Agreement and the Merger; and (c) prepare and file with the SEC a preliminary proxy or information statement relating to this Agreement and the Merger and use its reasonable best efforts to obtain and furnish the information required to be included in the Proxy Statement and, after consultation with Parent and Purchaser, respond promptly to any comments made by the SEC with respect to the preliminary proxy statement or information statement and cause a definitive proxy or information statement relating to this Agreement and the Merger (such proxy or information statement together with any and all amendments or supplements thereto, the "PROXY STATEMENT") to be mailed to its stockholders at the earliest practicable time following the expiration or termination of the Offer. At the Stockholders Meeting, Parent and Purchaser and any of their respective Subsidiaries will vote, or cause to be voted, all shares of Company Common Stock owned by them in favor of this Agreement and the transactions contemplated hereby. 2.14 MERGER WITHOUT MEETING OF STOCKHOLDERS. If Parent, Purchaser or any other Subsidiary of Parent shall acquire at least 90% of the outstanding shares of Company Common Stock pursuant to the Offer or otherwise, the parties hereto agree, subject to satisfaction or (to the extent permitted hereunder) waiver of all conditions to the Merger, to take all necessary and appropriate action to cause the Merger to be effective as soon as practicable after the acceptance for payment and purchase of shares of Company Common Stock pursuant to the Offer without the Stockholders Meeting. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY Except as set forth in the disclosure letter delivered prior to the execution of this Agreement to Parent (the "COMPANY DISCLOSURE LETTER"), the Company represents and warrants to Parent and Purchaser as of the date of this Agreement as follows: 3.1 EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Delaware. The Company is duly licensed or qualified to do business as a foreign corporation and is in good standing under the laws of any other state of the United States in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary, except where the failure to be so qualified or to be in good standing could not reasonably be expected to have a Company Material Adverse Effect. As used herein, the term "Company Material Adverse Effect" means a material adverse effect on (i) the business, properties, operations results of operations or condition (financial or otherwise) of (x) the Company and the Company's Subsidiaries taken as a whole or (y), for purposes only of Article III of this Agreement, any one of the Company's plants; or (ii) the ability of the Company to perform its obligations hereunder. Notwithstanding the foregoing, none of the following shall be deemed, either alone or in combination, to constitute a "COMPANY MATERIAL ADVERSE EFFECT:" (i) a change in the market price or trading volume of Company Common Stock, (ii) any adverse 11 change, event or effect that is caused by conditions affecting the economy of the United States generally or the economy of any nation or region in which the Company or any of its Subsidiaries conducts business that is material to the business of such entity and its Subsidiaries, taken as a whole, or (iii) the matters set forth specifically in Section 3.1 of the Company Disclosure Letter. As used herein, any reference to one or more failures, lapses, defaults, breaches or other events or circumstances that "could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect" shall refer to such one or more failures, lapses, defaults, breaches or other events or circumstances in the aggregate with all other failures, lapses, defaults, breaches or other events or circumstances described in this Agreement which would be required to be mentioned or disclosed herein or in the schedules or exhibits hereto but for the fact that the same could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect (and like phrases shall be similarly interpreted). The Company has all requisite corporate power and authority to own, operate and lease its properties and carry on its business as now being conducted, except where the failure to have such corporate power and authority could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. The copies of the Company's certificate of incorporation and bylaws made available to Parent are true and correct as of the date hereof. 3.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. The Company has the requisite corporate power and authority to execute and deliver this Agreement and all agreements and documents contemplated hereby. The Agreement, the Merger, and the purchase of shares of Company Common Stock contemplated by the Offer have been approved by the Board and (other than, with respect to the Merger, the approval and adoption of this Agreement and the transactions contemplated hereby by the holders of a majority of the then outstanding shares of Company Common Stock, if so required), the consummation by the Company of the transactions contemplated hereby has been duly authorized by all requisite corporate action and the Board has adopted resolutions so that the restrictions on business combinations applicable to "interested stockholders" contained in Section 203 of the DGCL will not apply to the Offer, the Merger and the other transactions contemplated by this Agreement. This Agreement constitutes, and all agreements and documents contemplated hereby (when executed and delivered pursuant hereto) will constitute, the valid and legally binding obligations of the Company, enforceable against the Company in accordance with their respective terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights and general principles of equity. 3.3 CAPITALIZATION. (a) The authorized capital stock of the Company consists of 60,000,000 shares of Company Common Stock, $0.01 par value, 50,000 shares of Series A preferred stock, $10 par value ("COMPANY SERIES A PREFERRED STOCK"), 500,000 shares of Series B preferred stock, $10 par value ("COMPANY SERIES B PREFERRED STOCK") and 5,000,000 shares of preferred stock, $10 par value ("COMPANY PREFERRED STOCK"). As of February 15, 2000, there were (i) 27,375,771 shares of Company Common Stock issued and outstanding, (ii) 8,470,424 shares of Company Common Stock held in the Company's treasury, and (iii) no shares of Company Series A Preferred Stock, Company Series B Preferred Stock or Company Preferred Stock issued and outstanding. All issued and outstanding shares of Company Common Stock are duly authorized, 12 validly issued, fully paid, nonassessable, free of preemptive rights, and were issued in compliance with all applicable laws. (b) The Company Disclosure Letter lists all outstanding options, warrants and other rights to purchase shares of Company Common Stock as of February 15, 2000 with descriptions of such options, warrants and other rights. (c) Since February 15, 2000, (i) no options, warrants or other rights to purchase shares of Company Common Stock have been granted, and (ii) no additional shares of capital stock of the Company have been issued, except pursuant to the exercise of outstanding options. (d) Except with respect to the Rights and as set forth in paragraphs (a), (b) and (c) above and in the Company Disclosure Letter, the Company does not have any shares of its capital stock issued or outstanding and there are no outstanding subscriptions, options, warrants, calls, subscriptions, convertible securities, rights or other agreements or commitments obligating the Company or any Subsidiary of the Company to issue, transfer or sell any shares of capital stock of the Company or any Subsidiary of the Company or to repurchase any such shares of capital stock. Neither the Company nor any of its Subsidiaries has outstanding bonds, debentures, notes or other obligations the holders of which have the right to vote (or which are convertible into or exercisable for securities having the right to vote) with the stockholders of the Company or such Subsidiary on any matter. Any equity securities, which were issued and reacquired by the Company or any of its Subsidiaries, were so reacquired in compliance with all applicable laws, and neither the Company nor any of its Subsidiaries has any obligation or liability with respect thereto. 3.4 SUBSIDIARIES. Each Subsidiary of the Company is a corporation, limited liability company or partnership duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation or organization, has the corporate, limited liability company or partnership power and authority to own its properties and to carry on its business as it is now being conducted, and is duly qualified to do business and is in good standing in each jurisdiction in which the ownership of its property or the conduct of its business requires such qualification, except for jurisdictions in which such failure to be so qualified or to be in good standing could not reasonably be expected to have a Company Material Adverse Effect. The copies of the organizational and charter documents for the Company's Subsidiaries made available to Parent are true and correct as of the date hereof. The Company Disclosure Letter lists all of the Company's Subsidiaries and correctly sets forth the capitalization of each Subsidiary, the jurisdiction in which each Subsidiary of the Company is organized or formed, and the current directors and executive officers of each Subsidiary of the Company. All outstanding securities or other ownership interests in each Subsidiary of the Company are (i) owned of record and beneficially by the Company or another of the Company's wholly-owned Subsidiaries and subject to no lien (other than liens for taxes not yet due and payable), claim, charge or encumbrance, and (ii) have been duly authorized, are validly issued, fully paid and nonassessable. 3.5 OTHER INTERESTS. Except as set forth on the Company Disclosure Letter and except for interests in Subsidiaries of the Company, neither the Company nor any Subsidiary 13 of the Company owns directly or indirectly any interest or investment (whether equity or debt) in any corporation, partnership, limited liability company, joint venture, business, trust or other entity. 3.6 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) Except as set forth in the Company Disclosure Letter, the execution and delivery of this Agreement by the Company do not, and the consummation by the Company of the transactions contemplated hereby will not, (1) conflict with or violate the certificate of incorporation or bylaws or equivalent organizational documents of (i) the Company or (ii) any Subsidiary of the Company, (2) subject to making the filings and obtaining the approvals identified in Section 3.6(b) of this Agreement, conflict with or violate any law, rule, regulation, order, judgment or decree applicable to the Company or any Subsidiary of the Company or by which any property or asset of the Company or any Subsidiary of the Company is bound or affected, or (3) subject to making the filings and obtaining the approvals identified in Section 3.6(b) of this Agreement, result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, result in the loss of a material benefit under, or give to others any right of purchase or sale, or any right of termination, amendment, acceleration, increased payments or cancellation of, or result in the creation of a lien or other encumbrance on any property or asset of the Company or any Subsidiary of the Company pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit, franchise or other instrument or obligation (each, a "CONTRACT") to which the Company or any Subsidiary of the Company is a party or by which the Company or any Subsidiary of the Company or any property or asset of the Company or any Subsidiary of the Company is bound or affected; except, in the case of clauses (2) and (3), for any such conflicts, violations, breaches, defaults or other occurrences which would not prevent or delay consummation of any of the transactions contemplated hereby in any material respect, or otherwise prevent the Company from performing its obligations under this Agreement in any material respect, and could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. (b) The execution and delivery of this Agreement by the Company do not, and the consummation by the Company of the transactions contemplated hereby will not, require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, domestic or foreign (each a "GOVERNMENTAL ENTITY") or any other third-party, except (1) for: (i) applicable requirements, if any, of the Exchange Act, the Securities Act of 1933, as amended (the "SECURITIES ACT"), state securities or "blue sky" laws ("BLUE SKY LAWS") and state takeover laws, 14 (ii) the pre-merger notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations thereunder (the "HSR ACT"), (iii) filing of the Certificate of Merger and related documents as required by the DGCL, (iv) applicable requirements under the rules and regulations of the New York Stock Exchange (the "NYSE"), (v) the pre-merger notification requirements of the Competition Act and the Investment Canada Act; and (2) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay consummation of any of the transactions contemplated hereby in any material respect, or otherwise prevent the Company from performing its obligations under this Agreement in any material respect, and could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. 3.7 COMPLIANCE; PERMITS. (a) The Company and each Subsidiary of the Company are in compliance with: (1) all laws, rules, regulations, orders, judgments and decrees applicable to the Company or any Subsidiary of the Company or by which any property or asset of the Company or any Subsidiary of the Company is bound or affected, and (2) all Contracts to which the Company or any Subsidiary of the Company is a party or by which the Company or any Subsidiary of the Company or any property or asset of the Company or any Subsidiary of the Company is bound or affected; except in both (1) and (2) where failure to comply could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. (b) The Company and the Company's Subsidiaries have obtained, and are in compliance with the terms of, all licenses, permits and other authorizations and have taken all actions required by applicable law or governmental regulations in connection with their businesses as now conducted, except where the failure to obtain any such item or to take any such action could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. 3.8 SEC DOCUMENTS. (a) The Company has filed all forms, reports and documents with the SEC since May 1, 1996 required to be filed by it under the Securities Act and the Exchange Act (collectively, the "COMPANY REPORTS"). 15 (b) As of the filing date, each Company Report complied as to form in all material respects with the applicable requirements of the Securities Act and the Exchange Act, as the case may be. (c) As of its filing date (or, if amended or superceded by a filing prior to the date hereof, on the date of such later filing), each Company Report filed pursuant to the Exchange Act did not, and each such Company Report filed subsequent to the date hereof will not, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. (d) Each Company Report that is a registration statement, as amended or supplemented, if applicable, filed pursuant to the Securities Act, as of the date such statement or amendment became effective, did not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading. (e) None of the Company's Subsidiaries is required to file any forms, reports or other documents with the SEC. 3.9 FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES. The audited consolidated financial statements and unaudited consolidated interim financial statements of the Company included in the Company Reports (including the notes thereto) fairly present, in conformity with generally accepted accounting principles ("GAAP") applied on a consistent basis (except as may be indicated in the notes thereto), the consolidated financial position of the Company and its consolidated Subsidiaries as of the dates thereof and their consolidated results of operations and cash flows for the periods then ended (subject to normal year-end adjustments and footnotes in the case of any unaudited interim financial statements). Except as and to the extent reflected or reserved against in such consolidated balance sheets (including the notes thereto), and except for liabilities or obligations which were incurred in the ordinary course of business consistent with past practice since October 30, 1999 or which were incurred after such date and are expressly disclosed in the Company Reports filed following such date and prior to the date hereof, the Company and its Subsidiaries do not have any liabilities or obligations (absolute or contingent) of a nature required to be or customarily reflected in a consolidated balance sheet (or the notes thereto) prepared in accordance with GAAP consistently applied. The consolidated statements of operations present fairly in all material respects the results of operations of the Company for the periods indicated. 3.10 ABSENCE OF CERTAIN CHANGES. Except as specifically contemplated by this Agreement, since April 30, 1999 there has not occurred (a) any circumstance or event not expressly disclosed in the Company Reports filed following such date and prior to the date hereof having a Company Material Adverse Effect or any circumstance or event that could reasonably be expected to have a Company Material Adverse Effect; (b) any declaration, setting aside or payment of any dividend or other distribution with respect to its capital stock; (c) any material change in its accounting principles, practices or methods; (d) any damage or destruction to, or loss of, any physical property, whether or not covered by insurance, that could individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect; (e) any 16 amendment or changes in the certificate of incorporation or by-laws of the Company; or (f) other than in the ordinary course of business, any sale of a material amount of assets of the Company or any of its Subsidiaries. Except as set forth in the Company Disclosure Letter, since October 30, 1999, neither the Company nor any Subsidiary of the Company has taken any other action that it would be prohibited from taking without Parent's consent after the date hereof pursuant to Section 5.1 other than such actions taken in the ordinary course of business. 3.11 MATERIAL CONTRACTS. The Company Disclosure Letter sets forth a complete and accurate list as of the date of this Agreement of any of the following to which the Company or any Subsidiary of the Company is a party or by which the Company or any Subsidiary of the Company is bound (each, a "COMPANY MATERIAL CONTRACT"): (a) all contracts, agreements, commitments or understandings which involve payments or receipts by the Company or any of its Subsidiaries in excess of $1,000,000 during any twelve month period; (b) all written management, compensation, employment or other contracts entered into with any executive officer or director of the Company or any Subsidiary of the Company; (c) all contracts or agreements under which the Company or any Subsidiary of the Company has any outstanding indebtedness, obligation or liability for borrowed money or the deferred purchase price of property or has the right or obligation to incur any such indebtedness, obligation or liability; (d) all bonds or agreements of guarantee or indemnification in which the Company or any Subsidiary of the Company acts as surety, guarantor or indemnitor with respect to any obligation (fixed or contingent), other than any such guarantees of the obligations of the Company or any Subsidiary of the Company; (e) all noncompete agreements to which the Company, any Subsidiary of the Company or any affiliate thereof is a party; (f) all partnership and joint venture agreements; (g) each other contract or agreement listed as an exhibit to the Company's most recent Form 10-K and 10-Q; and (h) all agreements relating to material business acquisitions or dispositions during the last three years, including any separate tax or indemnification agreements. Except as set forth in the Company Disclosure Letter, (i) neither the Company nor any Subsidiary of the Company is in default under the terms of any Company Material Contract, which default permits the other party to adversely alter or terminate any rights of the Company or any Subsidiary of the Company or accelerate the obligations of the Company or any Subsidiary of the Company under such Company Material Contract or to collect damages, (ii) to the knowledge of the Company, no other party thereto is in default in any material respect under the terms of any Company Material Contract, (iii) each Company Material Contract is valid, 17 binding and in full force and effect in all material respects, and (iv) all contracts or agreements under which the Company or any Subsidiary of the Company has any outstanding indebtedness, obligation or liability for borrowed money may be prepaid in full without any prepayment penalties. 3.12 LITIGATION. Except as set forth in the Company Disclosure Letter, there is no action, suit or proceeding pending against the Company or any Subsidiary of the Company or, to the knowledge of the Company, threatened against the Company or any Subsidiary of the Company, at law or in equity, or before or by any federal or state court, commission, board, bureau, agency or instrumentality, that (i) if resolved adversely to it could, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect or impair its ability to consummate the Merger or (ii) seeks an amount of damages in excess of $1,000,000. The Company is not aware of any judicial or administrative decision affecting it or any Subsidiary of the Company that could reasonably be expected to impair its ability to consummate the Merger. 3.13 TAXES. The Company and each of its Subsidiaries has timely and accurately filed, or caused to be timely and accurately filed, all material Tax Returns (as hereinafter defined) required to be filed by it, and has paid, collected or withheld, or caused to be paid, collected or withheld, all material amounts of Taxes (as hereinafter defined) required to be paid, collected or withheld, other than Taxes for which adequate reserves have been established and are included in the financial statements included in the most recent Company Reports. There are no material claims, assessments, audits or investigations pending against the Company or any of its Subsidiaries for any alleged deficiency in any Tax or relating to any liability in respect of any Taxes, and the Company has not been notified in writing of any material proposed Tax claims or assessments against the Company or any of its Subsidiaries (other than in each case, claims and assessments for which adequate reserves have been established and are included in the financial statements included in the most recent Company Reports). Except as set forth in the Company Disclosure Letter, other than with respect to the Company and its Subsidiaries, neither the Company nor any of its Subsidiaries is liable for Taxes of any other Person (as hereinafter defined), or is currently under any contractual obligation to indemnify any Person with respect to Taxes (except for customary agreements to indemnify lenders or security holders in respect of Taxes other than income Taxes), or is a party to any Tax sharing agreement or any other agreement providing for payments by the Company or any of its Subsidiaries with respect to Taxes. Neither the Company nor any of its Subsidiaries will be required to include any adjustment in taxable income for any period ending after the Closing under Section 481 of the Code (or under any similar provision of the Tax laws of any jurisdiction) as a result of a change in the method of accounting for a period ending on or before the Closing or pursuant to an agreement with a Tax authority with regard to the Tax liability of the Company or any of its Subsidiaries for any period ending on or before the Closing. Except as set forth in the Company Disclosure Letter, the Company is not a party to any agreement, contract, arrangement or plan that would result (taking into account the Transactions contemplated by this Agreement), separately or in the aggregate, in the payment of any "excess parachute payments" within the meaning of Section 280G of the Code. As used herein, the term "TAX" means any United States federal, state, local, non-United States or provincial income, gross receipts, property, sales, use, license, excise, franchise, 18 employment, payroll, alternative or add-on minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty, governmental fee or other like assessment or charge imposed by any Governmental Entity, together with any interest or penalty imposed thereon. As used herein, the term "TAX RETURN" means a report or other information (including any attached schedules or any amendments to such report, return or other information) required to be supplied to or filed with a Governmental Entity with respect to any Tax, including an information return, claim for refund, amended return or declaration or estimated Tax. As used herein, the word "PERSON" means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof. 3.14 EMPLOYEE BENEFIT PLANS. (a) EMPLOYEE BENEFIT PLANS, COLLECTIVE BARGAINING AND EMPLOYEE AGREEMENTS, AND SIMILAR ARRANGEMENTS. (1) The Company Disclosure Letter lists all employee benefit plans and collective bargaining, employment or severance agreements or other similar arrangements to which or by which the Company or any Subsidiary of the Company is bound, legally or otherwise, or under which there is any continuing obligation of the Company or any Subsidiary of the Company (collectively, the "PLANS"), including, without limitation, (a) any profit-sharing, deferred compensation, bonus, stock option, stock purchase, pension, retainer, consulting, retirement, severance, welfare or incentive plan, agreement or arrangement, (b) any material plan, agreement or arrangement providing for "fringe benefits" or perquisites to employees, officers, directors or agents, including but not limited to benefits relating to the Company automobiles, clubs, vacation, child care, parenting, sabbatical, sick leave, medical, dental, hospitalization, life insurance and other types of insurance, or (c) any other "employee benefit plan" within the meaning of Section 3(3) or the Employee Retirement Income Security Act of 1974, as amended ("ERISA"). (2) [intentionally omitted] (3) To the best knowledge of the Company, there are no negotiations, demands or proposals that are pending or have been made which concern matters now covered by the Plans, or that (if adopted) would be covered, by employee benefit plans, agreements or arrangements of the type described in this section. (4) The Company and each Subsidiary of the Company are in compliance in all material respects with the applicable provisions of ERISA (as amended through the date of this Agreement), the regulations and published authorities thereunder, and all other laws applicable with respect to the Plans. The Company and each Subsidiary of the Company have performed all of their obligations under the Plans. To the best knowledge of the Company as of the date of this Agreement, there are no actions (other than routine claims for benefits) pending or threatened against the Plans or their assets, or arising out of the Plans and all of the Plans have been operated in compliance in all material respects with their terms. To the best knowledge of the Company, as of the date of this Agreement, no facts exist which could give rise to any such actions. 19 (5) All obligations of the Company and each Subsidiary of the Company under each of the Plans (x) that are due prior to the Effective Time have been paid or will be paid prior to that date, and (y) that have accrued prior to the Effective Time have been or will be paid or properly accrued at that time. (6) The Company and each Subsidiary of the Company have classified all individuals who perform services for the Company or any Subsidiary of the Company correctly under the Plans, ERISA and the Code as common law employees, independent contractors or leased employees, except where the failure to classify individuals correctly could not result in a material liability for the Company or the Plans. (b) RETIREMENT PLANS. (1) The Company Disclosure Letter lists all "employee pension benefit plans" (within the meaning of Section 3(2) of ERISA) which are also stock bonus, pension or profit sharing plans within the meaning of Section 401(a) of the Code (the "RETIREMENT PLANS"). (2) Each Retirement Plan has been duly authorized by the appropriate board of directors of the Company and/or Subsidiary of the Company whichever is appropriate. Each Retirement Plan is qualified in form and operation under Section 401(a) of the Code and each trust under each Retirement Plan is exempt from tax under Section 501(a) of the Code. No event has occurred that could reasonably be expected to give rise to disqualification or loss of tax-exempt status of any Retirement Plan or trust thereunder. To the best knowledge of the Company, no event has occurred that will or could subject any Retirement Plan to tax under Section 511 of the Code. To the best knowledge of the Company, no non-exempt prohibited transaction (within the meaning of Section 4975 of the Code) or party-in-interest transaction (within the meaning of Section 406 of ERISA) has occurred with respect to any Retirement Plan. (3) [intentionally omitted] (c) TITLE IV PLANS. No Plan is a "single employer plan" within the meaning of Section 4001(a)(15) of ERISA or a "multiemployer plan" within the meaning of Section 3(37) or Section 4001(a)(3) of ERISA. Neither the Company, any Subsidiary of the Company nor any ERISA Affiliate has ever maintained or had an obligation to contribute to a "single employer plan" within the meaning of Section 4001(a)(15) of ERISA or a "multiemployer plan" within the meaning of Section 3(37) or Section 4001(a)(3) of ERISA. "ERISA AFFILIATE" means any trade or business (whether or not incorporated) that is or was a member of a group of which the Company or any Subsidiary of the Company is or was a member and which is or was under common control with the Company or any Subsidiary of the Company within the meaning of Section 414 (b) or (c) of the Code or that would be treated as a single employer with the Company or any Subsidiary of the Company under Section 4001(a)(14) or Section 4001(b) of ERISA. (d) HEALTH PLANS. All group health plans of the Company, each Subsidiary of the Company and any ERISA Affiliate have been operated in compliance in all material respects with the group health plan continuation coverage requirements of Section 4980B of the Code. Except as required under Section 4980B of the Code or as provided in the Company's Employee 20 Severance Plan, neither the Company, any Subsidiary of the Company nor any ERISA Affiliate has any obligation to provide health benefits to any employee following termination of employment. (e) FINES AND PENALTIES. There has been no act or omission by the Company, any Subsidiary of the Company or any ERISA Affiliate that has given rise to or may give rise to fines, penalties, taxes, or related charges under Section 502(c) or (i) or Section 4071 of ERISA or Chapter 43 of the Code, which fines, penalties, taxes or related charges, individually or in the aggregate, could reasonably be expected to have a Company Material Adverse Effect. 3.15 LABOR AND EMPLOYMENT MATTERS. Except as set forth in the Company Disclosure Letter, there are no labor or collective bargaining agreements which pertain to the Company or any Subsidiary of the Company. To the knowledge of the Company, there is no union organizing effort pending or threatened against the Company or any Subsidiary of the Company. Except as set forth in the Company Disclosure Letter, there is no labor strike, material labor dispute, work slowdown, stoppage or lockout actually pending, or to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary of the Company. There is no unfair labor practice or labor arbitration proceeding pending or, to the knowledge of the Company, threatened against the Company or any Subsidiary of the Company relating to their business, except for any such proceeding, which could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. Except as set forth in the Company Disclosure Letter, none of the Company or any Subsidiary of the Company is a party to any employment, consulting, non-competition, severance, or indemnification agreement still in effect with any current or former executive officer or director of the Company or any Subsidiary of the Company. 3.16 NO BROKERS. No contract, arrangement or understanding has been entered intro with any person or firm which may result in the obligation of the Company, Purchaser or Parent to pay any finder's fees, brokerage or agent's commissions or other like payments in connection with the negotiations leading to this Agreement or the consummation of the transactions contemplated hereby, except (i) that the Company has retained Bear Stearns and Jefferson Capital Group, Ltd. as its financial advisors and the Company has retained Greenhill as financial advisor to the Special Committee. Other than as set forth in this Agreement, the Company is not aware of any claim against it for payment of any finder's fees, brokerage or agent's commissions or other like payments in connection with the negotiations leading to this Agreement or the consummation of the transactions contemplated hereby. 3.17 PROPERTIES. The Company and each Subsidiary of the Company have good and marketable title, free and clear of all liens, claims, encumbrances and restrictions (except liens, claims, encumbrances or restrictions arising under any existing bank agreements as described in the Company Reports and liens for Taxes not yet due and payable or which are being contested in good faith, statutory liens and other encumbrances and restrictions affecting real estate which do not secure amounts for borrowed money and will not materially impair title thereto), to all property and assets described in the Company Reports as being owned by it. All material leases to which the Company or any Subsidiary of the Company is a party are valid and binding and no default has occurred or is continuing thereunder, which could, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. The 21 Company and each of the Company's Subsidiaries enjoy peaceful and undisturbed possession under all such leases to which any of them is a party as lessee with such exceptions as do not materially interfere with the use made by the Company or any Subsidiary of the Company. The plants and equipment, taken as a whole, of each of the Company and each Subsidiary of the Company are in good operating condition and repair other than ordinary wear and tear. 3.18 ENVIRONMENTAL LAWS. (a) Except as set forth on the Company Disclosure Letter: (1) neither the Company nor any present or former Subsidiary of the Company has received any written notice, claim, request for information or demand from any governmental agency or third party alleging that the Company, any present or former Subsidiary of the Company or any Company Real Properties is in material violation of, is subject to any administrative or judicial proceeding pursuant to, or has any material liability under, any Environmental Law; (2) with respect to Company Real Properties which are currently owned, leased or operated by the Company or any present or former Subsidiary of the Company, to the knowledge of the Company, there has not occurred, nor is there presently occurring, any Release or Releases of any Hazardous Materials at, on, into, beneath or migrating from such Company Real Properties which could reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect; (3) with respect to Company Real Properties which were previously owned, leased or operated by the Company or any present or former Subsidiary of the Company, there did not occur any Release or Releases of any Hazardous Materials, at, on, into, beneath or migrating from such Company Real Properties during or, to the knowledge of the Company, prior to the period of ownership, lease or operation by the Company or any Subsidiary of the Company which could reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect; (4) neither the Company nor any present or former Subsidiary of the Company has Released, or allowed or arranged for any third parties to Release, any Hazardous Materials at any other site in violation of or which would reasonably be expected to lead to liability under, any Environmental Law which could reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect; (5) to the knowledge of the Company, neither the Company nor any present or former Subsidiary of the Company is a potentially responsible party with respect to a federal, state, local or foreign environmental cleanup site or sites or with respect to investigation or corrective actions under any Environmental Law with respect to matters which could reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect; (6) each of the Company and its Subsidiaries is currently in compliance with and has been in compliance with all Environmental Laws except where any 22 failure to comply could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect; (7) during the period of ownership, lease or operation by the Company or any present or former Subsidiary of the Company of any Company Real Properties, the Company or such Subsidiary operated the Company Real Properties in compliance with all Environmental Laws, except where any failure could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect;; and (8) there are no costs or liabilities associated with any capital or operating expenditures of the Company or any present or former Subsidiary of the Company required for clean-up, closure of properties or compliance with Environmental Laws or any permit, license, consent, exemption, franchise, authorization or other approval, any related constraints on operating activities or any potential liabilities to third parties under Environmental Laws which could reasonably be expected, individually or in the aggregate, to have a Company Material Adverse Effect. (b) As used in this Section, (1) "COMPANY REAL PROPERTIES" shall mean all real property now or previously owned, operated or leased by the Company or any present or former Subsidiary of the Company. (2) "HAZARDOUS MATERIALS" shall mean asbestos, petroleum products and all other materials on the date hereof defined as "hazardous substances," "hazardous wastes," "toxic substances," "solid wastes" or otherwise on or prior to the date hereof listed or regulated pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. (S)9601 et seq. ("CERCLA"); the Resource Conservation and Recovery Act, 42 U.S.C. (S)(S)6901 et seq. ("RCRA") and any amendments thereto; the Hazardous Materials Transportation Act, 49 U.S.C. (S)(S)1801 et seq. ("HMTA"); the Clean Water Act, the Safe Drinking Water Act; the Atomic Energy Act; the Federal Insecticide, Fungicide, and Rodenticide Act, the Clean Air Act; or any other similar foreign, federal, state or local statute, regulation or ordinance or any other law, as now in effect, relating to, or imposing liability or standards of conduct concerning any hazardous or toxic waste, substance or material. (3) "ENVIRONMENTAL LAWS" shall mean any and all foreign, federal, state and local laws (including, without limitation, common law), statutes, ordinances, rules, regulations, permits, licenses or other governmental requirements relating to health, pollution, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), the release or threatened release, discharge, emission, of any Hazardous Materials or materials containing Hazardous Materials or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials or the pollution of the environment, including, without limitation, CERCLA, RCRA and HMTA. (4) "RELEASE" shall mean releasing, spilling, leaking, pumping, pouring, emitting, emptying, discharging, escaping, leaching, disposing or dumping. 23 3.19 RELATED PARTY TRANSACTIONS. Except as set forth in the Company Disclosure Letter, no director or officer of the Company or any Subsidiary of the Company and no person related to any of them by consanguinity or marriage has any direct or indirect interest in (i) any material equipment or other property, real or personal, tangible or intangible, including, but without limitation, any item of intellectual property, used in connection with or pertaining to the Company's or any Subsidiary of the Company's business, or (ii) any creditor, supplier, customer, manufacturer, agent, representative, or distributor of products of the Company or any Subsidiary of the Company; PROVIDED, HOWEVER, that (A) no such director or officer or other person shall be deemed to have such an interest solely by virtue of the ownership of less than five percent (5%) of the outstanding voting stock or debt securities of any publicly-held company, the stock or debt securities of which are traded on a recognized stock exchange or quoted on the National Association of Securities Dealers Automated Quotation System, and (B) no such director or officer or other person shall be deemed to have such an interest solely by virtue of the ownership by a partnership in which he is a partner of less than 10% of the outstanding voting stock or debt securities of any privately held company. 3.20 INTELLECTUAL PROPERTY. The Company Disclosure Letter contains a true and correct list of all the patents, patent applications, trademarks, service marks, trade names, domain names, and registered copyrights owned or exclusively licensed by the Company or any Subsidiary of the Company. The Company and each Subsidiary of the Company own, or possess adequate and enforceable licenses or other rights to use, all patents, trade secrets, inventions, processes, technology, software, trademarks, service marks, trade names, domain names, and content (collectively, the "COMPANY INTELLECTUAL PROPERTY") used in the business of the Company or any Subsidiary of the Company as currently conducted. The Company and/or each of its Subsidiaries has made all necessary filings and recordations to protect and maintain its interest in the patents, patent applications, trademark and service mark registrations, trademark and service mark applications, copyright registrations and copyright applications and licenses included in the Company Intellectual Property, except where the failure to do so protect or maintain could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. Each patent, patent applications, trademark or service mark registration, and trademark or service mark application and copyright registration or copyright application of the Company and/or each of its Subsidiaries included in the Company Intellectual Property is valid and subsisting and each license of the Company Intellectual Property is valid, subsisting and enforceable, except where the failure to be valid, subsisting and enforceable could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect. The Company's and its Subsidiaries' ownership, licenses or rights in the Company Intellectual Property will not be affected by the consummation of the Merger. To the knowledge of the Company, (i) its rights in, to and under the Company Intellectual Property do not conflict with or infringe on the rights of any other person, (ii) no legal action or proceeding has been initiated, asserted or is pending, nor has any legal action or proceeding been threatened, against the Company or any Subsidiary of the Company either based upon or challenging or seeking to deny or restrict its use of any of the Company Intellectual Property, and (iii) no other person is using the Company Intellectual Property in a manner that conflict or infringes on the rights of the Company, nor has it made any written or oral claim or notice to such effect. The disclosure under the heading "Year 2000" contained in the Company's Quarterly Report on Form 10-Q for the period ended October 30, 1999 is accurate and in compliance with applicable law in all material respects. 24 3.21 STATE TAKEOVER STATUTES INAPPLICABLE. The restrictions on business combinations applicable to "interested stockholders" contained in Section 203 of the DGCL will not apply to the Offer, the Merger and the other transactions contemplated hereby. 3.22 PRODUCT LIABILITY. Since January 1, 1998, the Company has not received written notice of any claim, pending or threatened, against the Company or any of its Subsidiaries for injury to person or property of employees or any third parties suffered as a result of the sale of any product or performance of any service by the Company or any of its Subsidiaries, including claims arising out of the defective or unsafe nature of its products or services, which is reasonably likely, individually or in the aggregate, to have a Company Material Adverse Effect. 3.23 OPINIONS OF FINANCIAL ADVISORS. The Special Committee and the Board have been advised by Greenhill to the effect that in its opinion, as of the date of this Agreement, the price to be paid for shares of Company Common Stock in the Offer and the Merger is fair to the holders of shares of Company Common Stock from a financial point of view. The Company has been advised by Bear Stearns to the effect that, in its opinion, as of the date of this Agreement, the price to be paid for shares of Company Common Stock in the Offer and the Merger is fair to the holders of shares of Company Common Stock from a financial point of view. 3.24 RIGHTS AGREEMENT The Company has irrevocably taken, or will take, all necessary action, including, without limitation, amending the Rights Agreement with respect to all of the outstanding Rights, (a) to render the Rights Agreement inapplicable to this Agreement, the Offer, the Merger and the other transactions contemplated hereby, (b) to ensure that (i) Parent and Purchaser, or either of them, are not deemed to be an Acquiring Person (as defined in the Rights Agreement) pursuant to the Rights Agreement and (ii) no Section 11(b) Event or Section 13 Event (as such terms are defined in the Rights Agreement) occurs by reason of the execution and delivery of this Agreement or the consummation of the Offer, the Merger or transactions contemplated by this Agreement and (c) so that the Company will have no obligations under the Rights or the Rights Agreement in connection with the Offer and the Merger and the holders of shares of Company Common Stock and the associated Rights will have no rights under the Rights or the Rights Agreement in connection with the Offer and the Merger. The Rights Agreement, as so amended, has not been further amended or modified. Copies of all such amendments to the Rights Agreement have been previously provided to Purchaser. 3.25 FULL DISCLOSURE. (a) Each document required to be filed by the Company with the SEC or required to be distributed or otherwise disseminated to the Company's stockholders in connection with the Transactions (the "COMPANY FILINGS"), including, without limitation, the Schedule 14D-9 and any amendments or supplements thereto, when filed, distributed or disseminated, as applicable, will comply as to form in all material respects with the applicable requirements of applicable laws. (b) No information with respect to the Company or any Subsidiaries of the Company that the Company or any Subsidiary of the Company or any of their officers, directors, 25 employees, representatives or agents furnishes to Parent or Purchaser for inclusion or incorporation by reference in the Offer Documents, the Schedule 14D-9 or the Proxy Statement, including any amendments or supplements thereto, shall, at the respective times the Offer Documents and the Schedule 14D-9 are filed with the SEC or first published, sent or given to the Company's stockholders, or, in the case of the Proxy Statement, at the date the Proxy Statement is first mailed to the Company's stockholders or at the time of the Stockholders Meeting, contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading. Notwithstanding the foregoing, the Company does not make any representation or warranty with respect to the information that has been supplied by Parent or Purchaser or their officers, directors, employees, representatives or agents for inclusion or incorporation by reference in any of the foregoing documents. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER Parent and Purchaser each represents and warrants to the Company as of the date of this Agreement as follows: 4.1 EXISTENCE; GOOD STANDING; CORPORATE AUTHORITY. Each of Parent and Purchaser is a corporation duly incorporated, validly existing and in good standing under the laws of its jurisdiction of incorporation, is duly licensed or qualified to do business as a foreign corporation and is in good standing under the laws of any other state of the United States in which the character of the properties owned or leased by it or in which the transaction of its business makes such qualification necessary, except where the failure to be so qualified or to be in good standing would not reasonably be expected to have a Parent Material Adverse Effect. As used herein, a "Parent Material Adverse Effect" means material adverse effect on (i) the business, properties, operations, prospects, results of operations or condition (financial or otherwise) of Parent and Parent's Subsidiaries taken as a whole or (ii) the ability of Parent or Purchaser to perform its obligations hereunder. Each of Parent and Purchaser has all requisite corporate power and authority to own, operate and lease its properties and carry on its business as now being conducted. 4.2 AUTHORIZATION, VALIDITY AND EFFECT OF AGREEMENTS. Each of Parent and Purchaser has the requisite corporate power and authority to execute and deliver this Agreement and all agreements and documents contemplated hereby, and the consummation by Parent and Purchaser of the transactions contemplated hereby has been duly authorized by all requisite corporate action. This Agreement constitutes, and all agreements and documents contemplated hereby (when executed and delivered pursuant hereto) will constitute, the valid and legally binding obligations of Parent and Purchaser, enforceable against Parent and Purchaser in accordance with their respective terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights and general principles of equity. 26 4.3 NO CONFLICT; REQUIRED FILINGS AND CONSENTS. (a) The execution and delivery of this Agreement by Parent and Purchaser do not, and the consummation by Parent and Purchaser of the transactions contemplated hereby will not, (1) conflict with or violate the certificate of incorporation or bylaws or equivalent organizational documents of (i) Parent or (ii) Purchaser, (2) subject to making the filings and obtaining the approvals identified in Section 4.3(b) of this Agreement, conflict with or violate any law, rule, regulation, order, judgment or decree applicable to Parent or any Purchaser or by which any property or asset of Parent or any Purchaser is bound or affected, or (3) subject to making the filings and obtaining the approvals identified in Section 4.3(b) of this Agreement, result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, result in the loss of a material benefit under, or give to others any right of purchase or sale, or any right of termination, amendment, acceleration, increased payments or cancellation of, or result in the creation of a lien or other encumbrance on any property or asset of Parent or any Purchaser pursuant to, any Contract to which Parent or any Purchaser is a party or by which Parent or any Purchaser or any property or asset of Parent or any Purchaser is bound or affected: except, in the case of clauses (2) and (3), for any such conflicts, violations, breaches, defaults or other occurrences which would not prevent or delay consummation of any of the transactions contemplated hereby in any material respect, or otherwise prevent Parent from performing its obligations under this Agreement in any material respect, and would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect. (b) The execution and delivery of this Agreement by Parent and Purchaser does not, and the consummation of the transactions contemplated hereby by Parent and Purchaser will not, require any consent, approval, authorization or permit of, or filing with or notification to, any Governmental Entity or any other third-party, except (1) for (i) applicable requirements, if any, of the Exchange Act, the Securities Act, Blue Sky Laws and state takeover laws, (ii) the pre-merger notification requirements of the HSR Act, (iii) filing of the Certificate of Merger and related documents as required by DGCL, (iv) applicable requirements under the rules and regulations of the New York Stock Exchange (the "NYSE"), (v) the pre-merger notification requirements of the Competition Act and the Investment Canada Act; and 27 (2) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications, would not prevent or delay consummation of any of the transactions contemplated hereby in any material respect, or otherwise prevent Parent or Purchaser from performing its obligations under this Agreement in any material respect, and would not, individually or in the aggregate, reasonably be expected to have a Parent Material Adverse Effect. 4.4 NO BROKERS. Neither Parent nor Purchaser has not entered into any contract, arrangement or understanding with any person or firm which may result in the obligation of the Company, Purchaser or Parent to pay any finder's fee, brokerage or agent's commissions or other like payments in connection with the negotiations leading to this Agreement or the consummation of the transactions contemplated hereby, except that Parent has retained Credit Suisse First Boston as its financial advisor, the terms of which have been disclosed in writing to the Company before the date of this Agreement. Other than the foregoing arrangements, neither Parent nor Purchaser is aware of any claim for payment of any finder's fees, brokerage or agent's commissions or other like payments in connection with the negotiations leading to this Agreement or the consummation of the transactions contemplated hereby. 4.5 FULL DISCLOSURE. None of the information supplied or to be supplied by Parent or Purchaser, or any of its officers, directors, employees, representatives or agents, for inclusion or incorporation by reference in the Proxy Statement, the Schedule 14D-9 or the Offer Documents, including any amendments or supplements thereto, will, at the respective times that the Proxy Statement, the Schedule 14D-9 and the Offer Documents, or any amendments or supplements thereto, are filed with the SEC or first published, sent or given to the Company's stockholders or, in the case of the Proxy Statement or the Schedule TO, at the date first mailed to the Company's stockholders or at the time of the Stockholders Meeting or at the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Schedule TO shall comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. 4.6 NO PRIOR ACTIVITIES Except for the obligations or liabilities incurred in connection with its incorporation or organization or the negotiation and execution of this Agreement and the consummation of the transactions contemplated hereby, Purchaser has not incurred any obligations or liabilities nor engaged in any business or activities of any type or kind whatsoever or entered into any agreements or arrangements with any person or entity. 4.7 FINANCING. Parent has or will obtain sufficient funds necessary to enable it and Purchaser to consummate the Offer and the Merger and the transactions contemplated hereby on a timely basis. 28 ARTICLE V COVENANTS 5.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. The Company covenants and agrees that, during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Offer Completion Date, unless Parent shall otherwise agree in writing, and except as set forth in Section 5.1 of the Company Disclosure Letter or as contemplated hereby, the Company shall conduct its business and shall cause the businesses of its Subsidiaries to be conducted only in, and the Company and its Subsidiaries shall not take any action except in, the ordinary course of business and in a manner consistent with past practice; and the Company shall use reasonable commercial efforts to preserve substantially intact the business organization of the Company and its Subsidiaries, to keep available the services of the present officers, employees and consultants of the Company and its Subsidiaries and to preserve the present relationships of the Company and its Subsidiaries with customers, suppliers and other persons with which the Company or any of its Subsidiaries has significant business relations. By way of amplification and not limitation, except as contemplated by this Agreement, or as required by applicable law or rule of any stock exchange or over-the-counter market, neither the Company nor any of its Subsidiaries shall, during the period from the date of this Agreement and continuing until the earlier of the termination of this Agreement or the Offer Completion Date, and except as set forth in Section 5.1 of the Company Disclosure Letter, directly or indirectly do, or propose to do, any of the following without the prior written consent of Parent: (a) Amend or otherwise change the Company's certificate of incorporation or by-laws, or amend the Rights Agreement or reduce the rights issued thereunder; (b) Issue, sell, pledge, dispose of or encumber, or authorize the issuance, sale, pledge, disposition or encumbrance of, any shares of capital stock of any class, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of capital stock, or any other ownership interest (including, without limitation, any phantom interest) in the Company, any of its Subsidiaries or affiliates (except for the issuance of shares of Company Common Stock issuable pursuant to Options under the Option Plans, which options are outstanding on the date hereof; PROVIDED that the occurrence of a separation of the rights under the Rights Agreement, and the related issuance of shares of Company Common Stock to the Company's stockholders thereunder shall not be deemed a breach of this Agreement to the extent that (i) the occurrence of such separation occurred as a result of an unsolicited acquisition of Company Common Stock by a third party, and (ii) such acquisition did not occur as a result of the Company breaching Section 5.2 hereof; (c) Sell, pledge, dispose of or encumber any assets of the Company or any of its Subsidiaries (except for (i) sales of inventory in the ordinary course of business and in a manner consistent with past practice, (ii) dispositions of obsolete or worthless assets, and (iii) sales of assets not in excess of $1,000,000 in the aggregate); (d) (i) Declare, set aside, make or pay any dividend or other distribution (whether in cash, stock or property or any combination thereof) in respect of any of its capital stock, except that a wholly-owned Subsidiary of the Company may declare and pay a dividend to 29 its parent, (ii) split, combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, (iii) except as required by the terms of any security as in effect on the date hereof or expressly permitted hereunder, amend the terms or change the period of exercisability of, purchase, repurchase, redeem or otherwise acquire, or permit any Subsidiary to amend the terms or change the period of exercisability of, purchase, repurchase, redeem or otherwise acquire, any of its securities or any securities of its subsidiaries, including, without limitation, shares of Company Common Stock, or any option, warrant or right, directly or indirectly, to acquire any such securities, or propose to do any of the foregoing, or (iv) settle, pay or discharge any claim, suit or other action brought or threatened against the Company with respect to or arising out of a stockholder equity interest in the Company; (e) (i) Acquire (by merger, consolidation, or acquisition of stock or assets) any corporation, partnership or other business organization or division thereof; (ii) incur any indebtedness for borrowed money, except in the ordinary course of business or issue any debt securities or assume, guarantee (other than guarantees of the Company's Subsidiaries entered into in the ordinary course of business) or endorse or otherwise as an accommodation become responsible for, the obligations of any person, make any loans or advances, except in the ordinary course of business consistent with past practice; or (iii) commit to make any capital expenditures or purchases of fixed assets which are, in the aggregate, in excess of $7,000,000; PROVIDED that the Company shall consult with Parent with respect to any such commitment in excess of $1,000,000; or (iv) enter into or materially amend any contract, agreement, commitment or arrangement to effect any of the matters prohibited in this Section 5.1(e); (f) Except as set forth in Section 5.1 of the Company Disclosure Letter, increase the compensation or severance payable or to become payable to its directors, officers or employees, except for increases in salary or wages of employees of the Company or its Subsidiaries (who are not directors or executive officers of the Company) in accordance with past practices, or grant any severance or termination pay (except payments required to be made under obligations existing on the date hereof in accordance with the terms of such obligations) to, or enter into any employment or severance agreement with, any employee of the Company or any of its Subsidiaries, except for agreements with new employees entered into in the ordinary course of business and providing for annual base and bonus compensation not to exceed $150,000, or establish, adopt, enter into or amend any collective bargaining agreement, Plan (within the meaning of Section 3.14 of this Agreement), trust, fund, policy or arrangement for the benefit of any current or former directors, officers or employees or any of their beneficiaries, except, in each case, as may be required by law or as would not result in a material increase in the cost of maintaining such collective bargaining agreement, Plan, trust, fund, policy or arrangement; (g) Take any action to change accounting policies or procedures (including, without limitation, procedures with respect to revenue recognition, payments of accounts payable and collection of accounts receivable), except as required by a change in GAAP or SEC position occurring after the date hereof; (h) Except in the ordinary course of business, make any Tax election or settle or compromise any material United States federal, state, local or non-United States Tax liability; 30 (i) Pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise) in excess of $1,000,000 in the aggregate, other than the payment, discharge or satisfaction in the ordinary course of business and consistent with past practice of liabilities reflected or reserved against in the financial statements contained in the Company Reports or incurred in the ordinary course of business and consistent with past practice; or (j) Take, or agree in writing or otherwise to take, any of the actions described in Sections 5.1(a) through (i) above, or any action which would make any of the representations or warranties of the Company contained in this Agreement untrue or incorrect or prevent the Company from performing or cause the Company not to perform its covenants hereunder. 5.2 NO SOLICITATION. The Company shall not, directly or indirectly, or through any officer, director, employee, representative or agent of the Company or any of its Subsidiaries, and shall not permit any such officer, director, employee, representative or agent to, solicit or encourage the initiation of (including by way of furnishing information) any inquiries or proposals regarding, or participate in negotiations or discussions concerning any merger, sale of assets, sale of shares of capital stock (including without limitation by way of a tender offer) or similar transactions involving the Company or any Subsidiaries of the Company that if consummated would constitute an Alternative Transaction (as defined in Section 7.1) (any of the foregoing inquiries or proposals being referred to herein as an "ACQUISITION PROPOSAL"). Upon the execution of this Agreement, the Company shall immediately cease any discussions or negotiations with any person, entity or group (other than Parent or any of its affiliates or representatives) concerning any such transaction or any Acquisition Proposal that are continuing on the date hereof and thereafter shall seek to have returned to the Company any confidential information that has been provided in any such discussions or negotiations. Nothing in this section shall prevent the Board from (i) furnishing information to a third person which has made a BONA FIDE Acquisition Proposal that the Board reasonably determines is likely to lead to a Superior Proposal (as defined below) not solicited in violation of this Agreement, provided that, with respect to any person that is not currently party to a confidentiality agreement with the Company, such person has executed an agreement with confidentiality, standstill and other provisions substantially similar to those then in effect between the Company and Parent, or (ii) subject to compliance with the other terms of this Section 5.2, considering and negotiating a bona fide Acquisition Proposal that is a Superior Proposal not solicited in violation of this Agreement; PROVIDED, HOWEVER, that, as to each of clauses (i) and (ii), (x) such actions occur at a time prior to the consummation (or, if the Offer is consummated and extended, the initial consummation) of the Offer and (y) the Board determines in good faith (based on the advice of its financial advisor and counsel) that it is required to take such actions in order to discharge properly its fiduciary duties. For purposes of this Agreement, a "SUPERIOR PROPOSAL" means any proposal made by a third person to acquire, directly or indirectly, for consideration consisting of cash and/or securities, all of the equity securities of the Company entitled to vote generally in the election of directors or all or substantially all the assets of the Company, if, and only if, the Board reasonably determines (after consultation with its financial advisor and counsel) (i) that the proposed transaction would be more favorable from a financial point of view to its stockholders than the Offer and the Merger and the transactions contemplated by this Agreement taking into account at the time of determination any changes to the terms of this Agreement which as of that time had been proposed by Parent and (ii) that the person or entity making such 31 Acquisition Proposal is capable of consummating such Acquisition Proposal (based upon, among other things, the availability of financing and the degree of certainty of obtaining financing, the expectation of obtaining required regulatory approvals and the identity and background of such person). (a) The Company shall notify Parent promptly upon receipt of any Acquisition Proposal, or any modification of or amendment to any Acquisition Proposal, or any request for nonpublic information relating to the Company or any of its Subsidiaries in connection with an Acquisition Proposal or for access to the properties, books or records of the Company or any Subsidiary by any person or entity that informs the Board or such Subsidiary that it is considering making, or has made, an Acquisition Proposal. Such notice to Parent shall be made orally and in writing, and shall indicate the identity of the person making the Acquisition Proposal or intending to make an Acquisition Proposal or requesting non-public information or access to the books and records of the Company, the terms of any such Acquisition Proposal or modification or amendment to an Acquisition Proposal, and whether the Company is providing or intends to provide the person making the Acquisition Proposal with access to information concerning the Company as provided in this Section 5.2. the Company shall also promptly notify Parent, orally and in writing, if it enters into negotiations concerning any Acquisition Proposal. (b) Except as provided in the following sentence, neither the Company nor the Board shall withdraw or modify in a manner adverse to Parent or Purchaser, or propose to withdraw or modify in a manner adverse to Parent or Purchaser, or fail at Parent's request to reaffirm, the approval by such Board of this Agreement, the Offer or the Merger or the favorable recommendation of the Board with respect thereto. The foregoing notwithstanding, in the event that, after the Company has received a BONA FIDE Acquisition Proposal not solicited in violation of this Agreement, the Board determines (based on the advice of its counsel), prior to the consummation (or, if the Offer is consummated and extended, the initial consummation) of the Offer, that is required to do so in order to discharge properly its fiduciary duties, the Board may (x) withdraw or modify its approval or recommendation of this Agreement, the Offer or the Merger and disclose to the Company's stockholders a position contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act or otherwise make disclosure to them, or (y) approve or recommend such an Acquisition Proposal that is a Superior Proposal; PROVIDED, HOWEVER, that in no event may the Board take either such action earlier than the second full business day following Parent's receipt of written notice of the intention of the Board to do so. (c) The Company and the Board shall not (i) redeem the Rights under the Rights Agreement, or waive or amend any provision of the Rights Agreement, in any such case to permit or facilitate the consummation of any Acquisition Proposal or Alternative Transaction, or (ii) enter into any agreement with respect to, or otherwise approve or recommend to stockholders, or publicly propose to approve or recommend, any Acquisition Proposal or Alternative Transaction, unless this Agreement has been terminated in accordance with its terms. (d) The Company shall not release any third party from the confidentiality and standstill provisions of any agreement to which the Company is a party. 32 5.3 ACCESS TO INFORMATION; CONFIDENTIALITY. (a) The Company shall (and shall cause its Subsidiaries to): (i) afford to the officers, employees, accountants, counsel, financing sources and other representatives of Parent, reasonable access during normal business hours to its properties, books, contracts, commitments and records; (ii) furnish to Parent all information concerning its business, properties, personnel as Parent may reasonably request or has reasonably requested; and (iii) make available during normal business hours to the officers, employees, accountants, counsel, financing sources and other representatives of Parent the appropriate individuals (including management personnel, attorneys, accountants and other professionals) for discussion of the Company's business, properties, prospects and personnel as Parent may reasonably request. (b) Parent shall keep all information disclosed to it pursuant to this Agreement confidential in accordance with the terms of the confidentiality letter, dated December 10, 1999 (the "CONFIDENTIALITY LETTER"), between Parent and the Company. 5.4 CONSENTS; APPROVALS. The Company and Parent shall each use its reasonable best efforts (which efforts, to the extent reasonably practicable, shall be made prior to the consummation of the Offer) to obtain all consents, waivers, approvals, authorizations or orders (including, without limitation, all United States and foreign governmental and regulatory rulings and approvals), and the Company and Parent shall make all filings (including, without limitation, all filings with United States and foreign governmental or regulatory agencies) required in connection with the authorization, execution and delivery of this Agreement by the Company, Parent and Purchaser and the consummation by them of the transactions contemplated hereby. The Company, Purchaser and Parent shall furnish all information required to be included in the Proxy Statement or for any application or other filing to be made pursuant to the rules and regulations of any United States or foreign governmental body in connection with the transactions contemplated by this Agreement. Each party hereto shall make an appropriate filing of a notification and report form pursuant to the HSR Act with respect to the transactions contemplated hereby within ten business days after the date hereof, shall promptly supply any additional information and documentary material that may be requested pursuant to the HSR Act, and shall use commercially reasonable efforts to obtain early termination of the waiting period under the HSR Act. In addition, each party hereto shall promptly make any other filing that may be required under any antitrust law or by any antitrust authority. 5.5 INDEMNIFICATION AND INSURANCE. (a) The certificate of incorporation and by-laws of the Surviving Corporation shall contain provisions with respect to indemnification substantially to the same effect as those set forth in the certificate of incorporation and the by-laws of the Company on the date hereof, which provisions shall not be amended, modified or otherwise repealed for a period of six years after the Effective Time in any manner that would adversely affect the rights thereunder as of the 33 Effective Time of individuals who at the Effective Time were directors, officers, employees or agents of the Company, unless such modification is required after the Effective Time by law. (b) Parent shall cause the Surviving Corporation, to the fullest extent permitted under applicable law or under the Surviving Corporation's certificate of incorporation or by-laws, to indemnify and hold harmless, each present and former director, officer or employee of the Company or any of its Subsidiaries (collectively, the "INDEMNIFIED PARTIES") against any costs or expenses (including attorneys' fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, (x) arising out of or pertaining to the transactions contemplated by this Agreement or (y) otherwise with respect to any acts or omissions occurring at or prior to the Effective Time, to the same extent as provided in the Company's certificate of incorporation or by-laws or any applicable contract or agreement as in effect on the date hereof, in each case for a period of six years after the date hereof. In the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time) and subject to the specific terms of any indemnification contract, (i) any counsel retained by the Indemnified Parties for any period after the Effective Time shall be reasonably satisfactory to the Surviving Corporation, (ii) after the Effective Time, the Surviving Corporation shall pay the reasonable fees and expenses of such counsel, promptly after statements therefor are received and (iii) the Surviving Corporation will cooperate in the defense of any such matter; PROVIDED, HOWEVER, that the Surviving Corporation shall not be liable for any settlement effected without its written consent (which consent shall not be unreasonably withheld or delayed); and PROVIDED, FURTHER, that, in the event that any claim or claims for indemnification are asserted or made within such six-year period, all rights to indemnification in respect of any such claim or claims shall continue until the disposition of any and all such claims. The Indemnified Parties as a group may retain only one law firm to represent them with respect to any single action unless there is, under applicable standards of professional conduct, a conflict on any significant issue between the positions of any two or more Indemnified Parties, in which case each Indemnified Person with respect to whom such a conflict exists (or group of such Indemnified Persons who among them have no such conflict) may retain one separate law firm. (c) In addition, Parent will provide, or cause the Surviving Corporation to provide, for a period of not less than six years after the Effective Time, the Company's current directors and officers an insurance and indemnification policy that provides coverage for events occurring at or prior to the Effective Time (the "D&O INSURANCE") that is no less favorable than the existing policy or, if substantially equivalent insurance coverage is unavailable, the best available coverage; PROVIDED, HOWEVER, that Parent and the Surviving Corporation shall not be required to pay an annual premium for the D&O Insurance in excess of one and one-half of the annual premium currently paid by the Company for such insurance, but in such case shall purchase as much such coverage as possible for such amount. (d) This Section shall survive the consummation of the Merger at the Effective Time, is intended to benefit the Company, the Surviving Corporation and the Indemnified Parties, shall be binding on all successors and assigns of the Surviving Corporation and shall be enforceable by the Indemnified Parties. 34 5.6 EMPLOYEE BENEFITS (a) Effective as of the Effective Time and for a one-year period following the Effective Time, Parent shall provide, or cause the Surviving Corporation and its Subsidiaries and successors to provide, those persons who, immediately prior to the Effective Time, were employees of the Company and its Subsidiaries and who continue in such employment ("CONTINUING EMPLOYEES"), with benefits and compensation that are substantially comparable, in the aggregate, to the compensation and benefits provided to such employees as of the date of this Agreement; PROVIDED, that nothing herein shall restrict Parent or the Surviving Corporation from terminating the employment of any such employees in accordance with applicable laws and contractual rights, if any, of such employees. (b) Except with respect to accruals under any defined benefit pension plan, Parent will, or will cause the Surviving Corporation and its Subsidiaries to, give Continuing Employees full credit for purposes of eligibility, vesting and determination of the level of benefits under any employee benefit plans or arrangements maintained by Parent, the Surviving Corporation or any Subsidiary of Parent or the Surviving Corporation for such Continuing Employees' service with the Company or any Subsidiary of the Company to the same extent recognized by the Company for similar purposes immediately prior to the Effective Time. Parent will, or will cause the Surviving Corporation and its Subsidiaries to, (i) waive all limitations as to preexisting conditions, exclusions and waiting periods with respect to participation and coverage requirements applicable to the Continuing Employees under any welfare plan that such employees may be eligible to participate in after the Effective Time, other than limitations or waiting periods that are already in effect with respect to such employees and that have not been satisfied as of the Effective Time under any welfare plan maintained for the Continuing Employees immediately prior to the Effective Time, and (ii) provide each Continuing Employee with credit for any co-payments and deductibles paid prior to the Effective Time in satisfying any applicable deductible or out-of-pocket requirements under any welfare plans that such employees are eligible to participate in after the Effective Time to the same extent as if those deductibles or co-payments had been paid under the welfare plans for which such employees are eligible after the Effective Time. (c) For purposes of the Plans, the Offer Completion Date will constitute a "Change in Control" of the Company (as such term or similar term is defined in an applicable Plan). The Parent shall (i) cause the Surviving Corporation after the Offer Completion Date to pay all amounts provided under all Plans in accordance with their terms, and (ii) honor and cause the Surviving Corporation to honor all rights, privileges and modifications to or with respect to any such Plans which become effective as a result of such Change in Control. 5.7 NOTIFICATION OF CERTAIN MATTERS. The Company shall give prompt notice to Parent and Parent shall give prompt notice to the Company, of (i) the occurrence or nonoccurrence of any event the occurrence or nonoccurrence of which is reasonably likely to cause any representation or warranty of such party contained in this Agreement to be materially untrue or inaccurate, (ii) any failure of the Company or Parent, as the case may be, materially to comply with or satisfy, or the occurrence or nonoccurrence of any event the occurrence or nonoccurrence of which is reasonably likely to cause the failure by such party materially to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by 35 it hereunder; (iii) the Company obtaining knowledge of a material breach by Parent, or Parent obtaining knowledge of a material breach by the Company, of their respective representations, warranties, or covenants hereunder of which the breaching party has not already given notice pursuant to clauses (i) or (ii); or (iv) the occurrence of any other event which would be reasonably likely (A) to have a Company Material Adverse Effect or (B) to cause any condition set forth in ANNEX A hereto to be unsatisfied in any material respect at any time prior to the consummation of the Offer; PROVIDED, HOWEVER, that the delivery of any notice pursuant to this Section shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. 5.8 FURTHER ACTION. Upon the terms and subject to the conditions hereof each of the parties hereto shall use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all other things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement, to obtain in a timely manner all necessary waivers, consents and approvals and to effect all necessary registrations and filings, and otherwise to satisfy or cause to be satisfied all conditions precedent to its obligations under this Agreement. 5.9 PUBLIC ANNOUNCEMENTS. Parent and the Company shall consult with each other before issuing any press release or making any written public statement with respect to the Offer or Merger or this Agreement and shall not issue any such press release or make any such public statement without the prior consent of the other party, which shall not be unreasonably withheld; PROVIDED, HOWEVER, that either party may, without the prior consent of the other, issue such press release or make such public statement as may upon the advice of counsel be required by law or the rules and regulations of The New York Stock Exchange, in advance of obtaining such prior consent, if it has used all reasonable efforts to consult with the other party. 5.10 FINANCIAL INFORMATION. The Company will deliver to Parent, as soon as reasonably practicable, such financial information as Parent may request to the extent such financial information is regularly prepared by the Company for the Board or for management. ARTICLE VI CONDITIONS TO THE MERGER The respective obligations of each party to effect the Merger shall be subject to the fulfillment or waiver at or prior to the Effective Time of the following conditions: 6.1 OFFER. The Offer Completion Date shall have occurred. 6.2 STOCKHOLDER APPROVAL. This Agreement shall have been adopted at or prior to the Effective Time by the requisite vote of the stockholders of the Company in accordance with the DGCL. 6.3 NO INJUNCTION OR ACTION. No order, statute, rule, regulation, executive order, stay, decree, judgment or injunction shall have been enacted, entered, promulgated or enforced by any court or other Governmental Entity which prohibits or prevents the consummation of the Merger which has not been vacated, dismissed or withdrawn prior to the 36 Effective Time. The Company and Parent shall use all reasonable best efforts to have any of the foregoing vacated, dismissed or withdrawn by the Effective Time. 6.4 GOVERNMENTAL APPROVAL. All Consents of any Governmental Entity required for the consummation of the Merger and the transactions contemplated by this Agreement shall have been obtained, except for those Consents the failure to obtain which would not have a material adverse effect on the business, assets, condition (financial or other), liabilities or results of operations of the Surviving Corporation and its Subsidiaries taken as a whole. ARTICLE VII TERMINATION 7.1 TERMINATION. This Agreement may be terminated at any time prior to the Effective Time, notwithstanding approval thereof by the stockholders of the Company: (a) by mutual written consent duly authorized by the Boards of Directors of Parent and the Company; or (b) by either Parent or the Company if the initial consummation of the Offer shall not have occurred on or prior to June 30, 2000; PROVIDED, HOWEVER, that the right to terminate this Agreement under this Section 7.1(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Offer to be consummated on or prior to such date; or (c) by either Parent or the Company if, as the result of the failure of the Minimum Condition or any of the other conditions set forth in ANNEX A hereto, the Offer shall have terminated or expired in accordance with its terms without Purchaser having purchased any Shares pursuant to the Offer, PROVIDED that if the failure to satisfy any conditions set forth in ANNEX A shall be a basis for termination of this Agreement under any other clause of this Section 7.1, a termination pursuant to this clause (c) shall be deemed a termination under such other clause; or (d) by either Parent or the Company if a court of competent jurisdiction or governmental, regulatory or administrative agency or commission shall have issued a nonappealable final order, decree or ruling or taken any other nonappealable final action having the effect of permanently restraining, enjoining or otherwise prohibiting the Merger; or (e) by Parent, if, whether or not permitted to do so by this Agreement, the Board or the Company shall (x) (i) withdraw, modify or change its approval or recommendation of the Offer, this Agreement or the Merger in a manner adverse to Parent, (ii) approve or recommend to the stockholders of the Company an Acquisition Proposal or Alternative Transaction; or (iii) approve or recommend that the stockholders of the Company tender their shares in any tender or exchange offer that is an Alternative Transaction or (y) take any public position or make any disclosures to the Company's stockholders, whether or not permitted pursuant to Section 5.2, which has the effect of any of the foregoing; or (f) by Parent or the Company, if any representation or warranty of the Company or Parent, respectively, set forth in this Agreement shall be untrue when made, if such 37 failure to be true and correct, individually or in the aggregate, is reasonably likely to cause the failure of the condition contained in subparagraph (e) of ANNEX A; PROVIDED that, if such failure is curable prior to the Initial Expiration Date (or any extension thereof) by the Company or Parent, as the case may be, through the exercise of its reasonable best efforts and for so long as the Company or Parent, as the case may be, continues to exercise such reasonable best efforts, neither Parent nor the Company, respectively, may terminate this Agreement under this Section 7.1(f) until such Initial Expiration Date (or extension); or (g) by Parent or the Company, if any representation or warranty of the Company or Parent, respectively, set forth in this Agreement, shall have become untrue (without for this purpose giving effect to qualifications of materiality contained in such representations and warranties) if such failure to be true and correct, individually or in the aggregate, is reasonably likely to cause the failure of the condition contained in subparagraph (e) of ANNEX A, other than by reason of a Terminating Breach (as hereinafter defined); PROVIDED that, if any such failure is curable prior to the Initial Expiration Date (or any extension thereof) by the Company or Parent, as the case may be, through the exercise of its reasonable best efforts, and for so long as the Company or Parent, as the case may be, continues to exercise such reasonable best efforts, neither Parent nor the Company, respectively, may terminate this Agreement under this Section 7.1(g) until such Initial Expiration Date (or extension); or (h) by Parent or the Company, upon a material breach of any covenant or agreement on the part of the Company or Parent, respectively, set forth in this Agreement (a "TERMINATING BREACH"); PROVIDED that, except for any breach of the Company's obligations under Section 5.2, if such Terminating Breach is curable prior to the Initial Expiration Date (or any extension thereof) by the Company or Parent, as the case may be, through the exercise of its reasonable best efforts and for so long as the Company or Parent, as the case may be, continues to exercise such reasonable best efforts, neither Parent nor the Company, respectively, may terminate this Agreement under this Section 7.1(h) until such date; or (i) by the Company, in order to accept a Superior Proposal; PROVIDED that (A) the Offer shall not theretofore have been consummated (or, if the Offer is consummated and extended, initially consummated); (B) the Board determines (based on the advice of counsel) that it is required to accept such proposal in order to discharge properly its fiduciary duties; (C) the Company has given Parent two full business days' advance notice of the Company's intention to accept such Superior Proposal; (D) the Company shall have paid the Fee and the Expense Reimbursement pursuant to Section 7.3(b); and (E) the Company shall have complied in all respects with the provisions of Section 5.2. Notwithstanding the foregoing, the right to terminate this Agreement pursuant to clauses (e), (f), (g), (h) and (i) above shall not be available to Parent if Purchaser or any other affiliate of Parent shall have acquired Shares pursuant to the Offer. As used herein, "ALTERNATIVE TRANSACTION" means any of (i) a transaction pursuant to which any person (or group of persons (including the shareholders of any party to such transaction)) other than Parent or its affiliates (a "THIRD PARTY") acquires or would acquire more than 30% of the outstanding shares of any class of equity securities of the Company, whether from the Company or pursuant to a tender offer or exchange offer or otherwise, (ii) a merger or 38 other business combination involving the Company pursuant to which any Third Party acquires more than 30% of the outstanding equity securities of the Company or the entity surviving such merger or business combination, (iii) any transaction pursuant to which any Third Party acquires or would acquire control of assets (including for this purpose the outstanding equity securities of Subsidiaries of the Company and securities of the entity surviving any merger or business combination including any of the Company's Subsidiaries) of the Company, or any of its Subsidiaries having a fair market value (as determined by the Board in good faith) equal to more than 30% of the fair market value of all the assets of the Company and its Subsidiaries, taken as a whole, immediately prior to such transaction, or (iv) any other consolidation, business combination, recapitalization or similar transaction involving the Company or any of the Company Subsidiaries that are "significant" under Regulation S-X at a level of 30% or more, other than the transactions contemplated by this Agreement; PROVIDED, HOWEVER, that the term Alternative Transaction shall not include any acquisition of securities by a broker dealer in connection with a bona fide public offering of such securities. 7.2 EFFECT OF TERMINATION. In the event of the termination of this Agreement pursuant to Section 7.1, written notice thereof shall forthwith be given to the other party or parties specifying the provision hereof pursuant to which such termination is made, and this Agreement shall forthwith become void and there shall be no liability on the part of any party hereto or any of its affiliates, directors, officers or stockholders except for any obligation of the Company or Parent set forth in Section 7.3 hereof. Notwithstanding the foregoing, nothing herein shall relieve the Company or Parent from liability for any willful breach hereof (it being understood that the provisions of Section 7.3 do not constitute a sole or exclusive remedy for such willful breach). 7.3 FEES AND EXPENSES. (a) Except as set forth in this Section 7.3, all fees and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expenses, whether or not the Merger is consummated. (b) The Company shall pay Parent a fee of $25,000,000 (the "FEE") and shall also pay Parent $3,000,000 to reimburse Parent for its itemized out-of-pocket expenses in connection with the transactions contemplated hereby (the "Expense Reimbursement") upon the first to occur of any of the following events: (1) the termination of this Agreement by Parent or the Company pursuant to Section 7.1(b), Section 7.1(c), Section 7.1(f) or Section 7.1(g); PROVIDED that an Alternative Transaction shall be publicly announced by the Company or any third party within twelve months following the date of such termination and such transaction shall at any time thereafter be consummated on substantially the terms theretofore announced; PROVIDED further that if the termination of this Agreement is pursuant to Section 7.1(g), such Alternative Transaction, if all cash, must be no less favorable from a financial point of view to the shareholders of the Company than the transactions contemplated by the Offer and Merger, unless the events giving rise to the breach underlying such termination relate to the third party with whom the Alternative Transaction was consummated; 39 (2) the termination of this Agreement by Parent pursuant to Section 7.1(e) or Section 7.1(h); or (3) the termination of this Agreement by the Company pursuant to Section 7.1(i). (c) Upon the termination of this Agreement by Parent pursuant to Section 7.1(c) in the event of the failure of the Minimum Condition to be satisfied, the Company shall pay to Parent the Expense Reimbursement (in which case such payment shall be credited against any subsequent payment that may become due to Parent under Section 7.3(b)(1)). (d) Upon termination of this Agreement by Parent pursuant to Section 7.1(f), the Company shall pay to Parent the Expense Reimbursement (in which case such payment shall be credited against any subsequent payment that may become due to Parent under Section 7.3(b)(1)). (e) The Fee and/or the Expense Reimbursement shall be paid by wire transfer of same day funds to an account designated by Parent within two business days after a demand for payment following (i) in the case of the Fee and the Expense Reimbursement, the first to occur of any of the events described in Section 7.3(b); PROVIDED that, in the event of a termination of this Agreement under Section 7.1(i), the Fee and the Expense Reimbursement shall be paid as therein provided as a condition to the effectiveness of such termination; (ii) in the case of the Expense Reimbursement, the first to occur of any of the events described in Section 7.3(c) or 7.3(d). (f) The agreements contained in this Section 7.3 are an integral part of the transactions contemplated by this Agreement and do not constitute a penalty. In the event of any dispute between the Company and Parent as to whether the Fee or the Expense Reimbursement under this Section 7.3 is due and payable, the prevailing party shall be entitled to receive from the other party the reasonable costs and expenses (including reasonable legal fees and expenses) in connection with any action, including the filing of any lawsuit or other legal action, relating to such dispute. Interest shall be paid on the amount any unpaid fee at the publicly announced prime rate of Citibank, N.A. from the date such fee was required to be paid. ARTICLE VIII GENERAL PROVISIONS 8.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. The representations, warranties and agreements in this Agreement or in any instrument delivered pursuant to this Agreement shall not survive the Merger, PROVIDED that the representations and warranties of the Company shall not survive the Offer Completion Date, and PROVIDED FURTHER that the agreements contained in Section 1.3, Section 5.5 and this ARTICLE VIII will survive the Merger. 40 8.2 NOTICES. Any notice required to be given hereunder will be sufficient if in writing, and sent by facsimile transmission (provided that any notice received by facsimile transmission or otherwise at the addressee's location on any business day after 5:00 p.m. (addressee's local time) shall be deemed to have been received at 9:00 a.m. (addressee's local time) on the next business day), by courier service (with proof of service), hand delivery or certified or registered mail (return receipt requested and first-class postage prepaid), addressed as follows: If to Parent or Purchaser: If to the Company: International Paper Company Shorewood Packaging Company 2 Manhattanville Road 277 Park Avenue Purchase, NY 10577 New York, NY 10172 Attention: General Counsel Attention: Andrew N. Shore, Esq. Telecopier No.: 914-397-1909 Telecopier No.: 212-508-5677 With copies to: With copies to: O'Melveny & Myers LLP Skadden, Arps, Slate, Meagher & Flom LLP 153 East 53rd Street Four Times Square New York, NY 10022 New York, NY 10036-6522 Attention: Jeffrey J. Rosen, Esq. Attention: Jeffrey W. Tindell, Esq. Telecopier No.: 212-326-2061 Richard J. Grossman, Esq. Telecopier No.: 212-735-2000 or to such other address as any party shall specify by written notice so given, and such notice shall be deemed to have been delivered as of the date so telecommunicated, personally delivered or mailed. Any party to this Agreement may notify any other party of any changes to the address or any of the other details specified in this paragraph, provided that such notification shall only be effective on the date specified in such notice or five (5) business days after the notice is given, whichever is later. Rejection or other refusal to accept or the inability to deliver because of changed address of which no notice was given shall be deemed to be receipt of the notice as of the date of such rejection, refusal or inability to deliver. 8.3 ASSIGNMENT; BINDING EFFECT. Neither this Agreement nor any of the rights, interests or obligations hereunder may be assigned by any of the parties (whether by operation of law or otherwise) without the prior written consent of the other parties. Subject to the preceding sentence, this Agreement will be binding upon and shall inure to the benefit of the parties and their respective successors and permitted assigns. Notwithstanding anything contained in this Agreement to the contrary, except for the provisions of Section 5.5, nothing in this Agreement, expressed or implied, is intended to confer on any person other than the parties hereto or their respective heirs, successors, executors, administrators and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement. 8.4 ENTIRE AGREEMENT. This Agreement, the Exhibits, the Company Disclosure Letter, and any documents delivered by the parties in connection herewith constitute 41 the entire agreement among the parties with respect to the subject matter of this Agreement and supersede all prior representations, warranties, agreements and understandings among the parties, both written and oral, with respect thereto except the Confidentiality Agreement which shall continue in full force and effect, PROVIDED that if there is any conflict between the Confidentiality Agreement and this Agreement, this Agreement shall prevail; PROVIDED FURTHER, that if the Offer is terminated without Purchaser purchasing any shares of Company Common Stock, then the standstill and non-solicitation provisions set forth on pages four and five of the Confidentiality Agreement shall terminate. No prior drafts of this Agreement or portions thereof shall be admissible into evidence in any action, suit or other proceeding involving this Agreement. 8.5 AMENDMENT. This Agreement may be amended by the parties hereto, by action taken by their respective boards of directors, at any time before or after approval of matters presented in connection with the Merger by the stockholders of the Company, but after any such stockholder approval, no amendment shall be made which by law requires the further approval of stockholders without obtaining such further approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties. 8.6 GOVERNING LAW; CONSENT TO JURISDICTION. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to its rules of conflict of laws. (b) Each of the parties hereto (1) (A) consents to submit itself to the personal jurisdiction of any Federal court located in the State of Delaware or any Delaware state court in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement and (B) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, and (2) (A) agrees that any action under this Agreement may also be brought in any Federal or state court located in the City of New York, Borough of Manhattan and (B) agrees that it will not by motion or other action contest the bringing of any such action in the above mentioned courts rather than in any other venue or forum. 8.7 COUNTERPARTS. This Agreement may be executed by the parties in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. Each counterpart may consist of a number of copies of this Agreement each signed by less than all, but together signed by all of the parties hereto. This Agreement shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. 8.8 HEADINGS. Headings of the Articles and Sections of this Agreement are for the convenience of the parties only, and shall be given no substantive or interpretive effect whatsoever. 8.9 INTERPRETATION. When a reference is made in this Agreement to an Article, Section or Exhibit, such reference shall be to an Article or Section of, or an Exhibit to, this Agreement unless otherwise indicated. The table of contents to this Agreement is for 42 reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." The words "hereof," "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant thereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to a person are also to its permitted successors and assigns. Each of the parties has participated in the drafting and negotiation of this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement must be construed as if it is drafted by all the parties and no presumption or burden of proof will arise favoring or disfavoring any party by virtue of authorship of any of the provisions of this Agreement. 8.10 WAIVERS. Except as provided in this Agreement, no action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party, will be deemed to constitute a waiver by the party taking such action of compliance with any representations, warranties, covenants or agreements contained in this Agreement. The waiver by any party hereto of a breach of any provision hereunder will not operate or be construed as a waiver of any prior or subsequent breach of the same or any other provision hereunder. 8.11 INCORPORATION OF EXHIBITS. The Company Disclosure Letter and all Exhibits attached hereto and referred to in this Agreement are hereby incorporated in this Agreement and made a part of this Agreement for all purposes as if fully set forth in this Agreement. 8.12 SEVERABILITY. Any term or provision of this Agreement which is invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent (and only to the extent) of such invalidity or unenforceability without rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible. 8.13 ENFORCEMENT OF AGREEMENT. The parties hereto agree that irreparable damage would occur if any of the provisions of this Agreement was not performed in accordance with its specific terms or as otherwise breached and that money damages would not be an 43 adequate remedy for any breach of this Agreement. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court referred to in Section 8.6(b), this being in addition to any other remedy to which they are entitled at law or in equity. In any such action for specific performance, each of the parties will waive (a) the defense of adequacy of a remedy at law and (b) any requirement for the securing and posting of any bond. 8.14 WAIVER OF JURY TRIAL. EACH PARTY TO THIS AGREEMENT WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. 8.15 COMPANY DISCLOSURE LETTER. Except where reference is made to the Company Disclosure Letter in the definition of "Company Material Adverse Effect" or in Article V, any matter disclosed in a section of the Company Disclosure Letter shall be treated as if it were disclosed in all applicable locations throughout such disclosure letter to the extent that, based upon a reasonable review of such disclosure letter by someone familiar with this Agreement, its applicability would be readily apparent. No disclosure in the Company Disclosure Letter shall be deemed to be an admission or representation as to the materiality of the item so disclosed. 8.16 EXECUTION. This Agreement may be executed by facsimile signatures by any party and such signature shall be deemed binding for all purposes hereof, without delivery of an original signature being thereafter required. 8.17 PERSONAL LIABILITY. Neither this Agreement nor any other document delivered in connection with this Agreement (other than the Stockholders Agreement executed in connection herewith on the date hereof) shall create or be deemed to create or permit any personal liability or obligation on the part of any officer or director of the Company or any Subsidiary of the Company. 8.18 DATE FOR ANY ACTION. In the event that any date on which any action is required to be taken hereunder by any of the parties hereto is not a business day, such action shall be required to be taken on the next succeeding day which is a business day. 8.19 OBLIGATION OF PARENT AND THE COMPANY. Whenever this Agreement requires Purchaser or another Subsidiary of Parent to take any action, such requirement shall be deemed to include an undertaking on the part of Parent to cause Purchaser or such Subsidiary to take such action and a guarantee of the performance thereof. Whenever this Agreement requires the Surviving Corporation to take any action, from and after the Offer Completion Date, such requirement shall be deemed to include an undertaking on the part of Parent to cause the Surviving Corporation to take such action and a guarantee of the performance thereof. Whenever this Agreement requires a Subsidiary of the Company to take any action, such requirement shall be deemed to include an undertaking on the part of the Company to cause such Subsidiary to take such action and a guarantee of the performance thereof. 8.20 CERTAIN DEFINITIONS. As used in this Agreement: 44 (a) The term "AFFILIATE," as applied to any person, shall mean any other person directly or indirectly controlling, controlled by, or under common control with, that person; for purposes of this definition, "CONTROL" (including, with correlative meanings, the terms "controlling," "controlled by," "under common control with"), as applied to any person, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of that person, whether through the ownership of voting securities, by contract or otherwise. (b) A person will be deemed to "BENEFICIALLY" own securities if such person would be the beneficial owner of such securities under Rule 13d-3 under the Exchange Act, including securities which such person has the right to acquire (whether such right is exercisable immediately or only after the passage of time). (c) The term "BUSINESS DAY" means any day on which commercial banks are open for business in New York, New York other than a Saturday, a Sunday or a day observed as a holiday in New York, New York under the laws of the State of New York or the federal laws of the United States. (d) The term "KNOWLEDGE" or any similar formulation of "KNOWLEDGE" shall mean, with respect to the Company, the actual knowledge of the Company's executive officers. (e) The term "PERSON" shall include individuals, corporations, partnerships, trusts, limited liability companies, associations, unincorporated organizations, joint ventures, other entities, groups (which term shall include a "group" as such term is defined in Section 13(d)(3) of the Exchange Act), labor unions or Governmental Entity. 45 IN WITNESS WHEREOF, the parties have executed this Agreement and caused the same to be duly delivered on their behalf on the day and year first written above. INTERNATIONAL PAPER COMPANY By: /s/ David W. Oskin ------------------------------- Name: David W. Oskin Title: Executive Vice President SHOREWOOD PACKAGING CORPORATION By: /s/ Marc P. Shore --------------------------- Name: Marc P. Shore Title: Chairman and CEO INTERNATIONAL PAPER - 37, INC. By: /s/ James W. Guedry --------------------------- Name: James W. Guedry Title: President S-1 ANNEX A CONDITIONS TO THE OFFER Capitalized terms used but not defined herein shall have the meanings set forth in the Agreement and Plan of Merger (the "AGREEMENT") of which this Annex A is a part. Notwithstanding any other provision of the Offer, Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) promulgated under the Exchange Act (relating to the obligation of Purchaser to pay for or return tendered shares of Company Common Stock promptly after termination or withdrawal of the Offer), pay for, and (subject to any such rules or regulations) may delay the acceptance for payment of or the payment for any tendered shares of Company Common Stock and (except as provided in the Agreement) amend or terminate the Offer if (i) there shall not be validly tendered and not withdrawn prior to the expiration of the Offer a number of shares of Company Common Stock such that, upon consummation of the Offer, Purchaser would own at least fifty-one percent (51%) of the total number of issued and outstanding shares of Company Common Stock on a fully diluted basis (after giving effect to the conversion or exercise of all outstanding options, warrants and other rights or securities convertible into shares of Company Common Stock) (excluding any shares of Company Common Stock held by the Company or any of its Subsidiaries) (the "MINIMUM CONDITION") or (ii) any applicable waiting period under the HSR Act, the Competition Act or the Investment Canada Act or any similar legal regime in any other country applicable to significant operations of Parent or any of its Subsidiaries or Company or any of its Subsidiaries shall not have expired or been terminated prior to the expiration of the Offer or (iii) at any time on or after the date of this Agreement and before the initial time of acceptance of shares of Company Common Stock for payment pursuant to the Offer, any of the following conditions exists: (a) there shall be in effect an injunction or other order, decree, judgment or ruling by a Governmental Entity of competent jurisdiction or a law, rule or regulation shall have been promulgated, or enacted by a Governmental Entity of competent jurisdiction which in any such case (i) restrains or prohibits the making or consummation of the Offer or the consummation of the Merger, or (ii) prohibits or restricts the ownership or operation by Parent (or any of its affiliates or Subsidiaries) of any portion of the Company's business or assets or which would substantially deprive Parent and/or its affiliates or Subsidiaries of the benefit of ownership of the Company's business or assets, or compels Parent (or any of its affiliates or Subsidiaries) to dispose of or hold separate any portion of the Company's business or assets, or of its business or assets, or which would substantially deprive Parent and/or its affiliates or Subsidiaries of the benefit of ownership of the Company's business or assets, or (iii) imposes material limitations on the ability of Purchaser or Parent effectively to acquire or to hold or to exercise full rights of ownership of the shares of Company Common Stock, including, without limitation, the right to vote shares of Company Common Stock purchased by Purchaser pursuant to the Offer or acquired by Parent in the Merger on all matters properly presented to the stockholders of the Company, or (iv) imposes any material limitations on the ability of Parent and/or its affiliates or Subsidiaries effectively to control in any material respect the business and operations of the Company (other than, prior to the Effective Time, by reason of there being minority stockholder in the Company); or Annex A-1 (b) there shall have been instituted, pending or threatened (in writing or by public announcement) an action by a Governmental Entity seeking (i) to restrain or prohibit the making or consummation of the Offer or the consummation of the Merger or (ii) to impose any other restriction, prohibition or limitation referred to in the foregoing paragraph (a); or (c) this Agreement shall have been terminated by the Company or Parent in accordance with its terms; or (d) Parent and the Company shall have agreed in writing that Purchaser shall amend the Offer to terminate the Offer or postpone the payment for shares of Company Common Stock pursuant thereto; or (e) the representations and warranties of the Company set forth in the Agreement shall not be true and accurate in all respects as of the date of consummation of the Offer as though made on or as of such date (except for those representations and warranties that address matters only as of a particular date or only with respect to a specific period of time which need only be true and accurate as of such date or with respect to such period) (in each case without for this purpose giving effect to qualifications or limitations as to materiality or the absence of a Company Material Adverse Effect contained in such representations and warranties, but reading each such representation and warranty as though the Company Disclosure Letter included information plainly disclosed in the Company Reports filed subsequent to May 2, 1999 and prior to the date hereof), except for such failures to be true and correct as could not, individually or in the aggregate, reasonably be expected to have a Company Material Adverse Effect, or the Company shall have breached or failed to perform or comply in any material respect with any obligations, agreement or covenant required by the Agreement to be performed or complied with by it; PROVIDED, HOWEVER, that such breach or failure to perform is incapable of being cured or has not been cured prior to the Initial Expiration Date (or such later date upon with the Offer shall expire); or (f) The Company or Purchaser shall have failed to receive any or all governmental or third party consents and approvals to consummate the Offer which, if not received, would have a Company Material Adverse Effect; or (g) the Board shall have modified or amended its recommendation of the Offer in any manner adverse to Parent or shall have withdrawn its recommendation of the Offer, or shall have recommended acceptance of any Acquisition Proposal or shall have resolved to do any of the foregoing; or (h) (i) any corporation, entity or "group" (as defined in Section 13(d)(3) of the Securities Exchange Act) ("PERSON/GROUP"), other than Parent and Purchaser shall have acquired beneficial ownership of more than 21% of the outstanding shares of Company Common Stock, or shall have been granted any options or rights, conditional or otherwise, to acquire a total of more than 21% of the outstanding shares of Company Common Stock and which, in each case, does not tender the shares of Company Common Stock beneficially owned by it in the Offer; (ii) any new group shall have been formed which beneficially owns more than 15% of the outstanding shares of Company Common Stock and which does not tender the shares of Company Common Stock beneficially owned by it in the Offer; or (iii) any person/group (other Annex A-2 than Parent or one or more of its affiliates) shall have entered into an agreement in principle or definitive agreement with the Company with respect to a tender or exchange offer for any shares of Company Common Stock or a merger, consolidation or other business combination with or involving the Company; or (i) any change, development, effect or circumstance shall have occurred or be threatened that is reasonably likely to be a Company Material Adverse Effect; or (j) the Rights shall have become exercisable; which in the reasonable judgment of Parent or the Purchaser, in any such case, and regardless of the circumstances giving rise to such condition, makes it inadvisable to proceed with the Offer and/or with such acceptance for payment or payments. The foregoing conditions are for the sole benefit of Parent and Purchaser and may be asserted by Parent and Purchaser regardless of the circumstances giving rise to any such condition, and, subject to the terms of this Agreement, may be waived by Parent and Purchaser, in whole or in part, at any time and from time to time, in the sole discretion of Parent and Purchaser. The failure by Parent and Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any right, the waiver of such right with respect to any particular facts or circumstances shall not be deemed a waiver with respect to any other facts or circumstances, and each right shall be deemed an ongoing right which may be asserted at any time and from time to time. Should the Offer be terminated pursuant to the foregoing provisions, all tendered shares of Company Common Stock not theretofore accepted for payment pursuant thereto shall forthwith be returned to the tendering stockholders. Annex A-3 EX-99.(D)(2) 11 STOCKHOLDERS AGREEMENT STOCKHOLDERS AGREEMENT This STOCKHOLDER AGREEMENT (this "Agreement") is made and entered into as of this 16th day of February 2000 by and among International Paper Company, a New York corporation ("Parent"), International Paper-37, Inc., a Delaware corporation and a direct wholly owned subsidiary of Parent ("Purchaser"), and the individuals and other parties listed on SCHEDULE A attached hereto (each, a "Stockholder" and, collectively the "Stockholders"). All capitalized terms not otherwise defined herein shall have the meanings set forth in the Merger Agreement (as defined below). RECITALS WHEREAS, the Stockholders desire that Shorewood Packaging Corporation, a Delaware corporation (the "Company"), Parent and Purchaser enter into an Agreement and Plan of Merger dated as of the date hereof (as the same may be amended or supplemented, the "Merger Agreement") with respect to a tender offer by Purchaser to purchase any and all of the outstanding shares of common stock, $.01 par value, of the Company ("Company Common Stock") and the associated rights to purchase preferred stock, issued pursuant to the Rights Agreement, dated as of June 12, 1995, between the Company and The Bank of New York, and a business combination whereby Purchaser will be merged with and into the Company (the "Merger"); and WHEREAS, the Stockholders are executing this Agreement as an inducement to Parent to enter into and execute, and to cause Purchaser to enter into and execute, the Merger Agreement. NOW, THEREFORE, in consideration of the execution and delivery by Parent and Purchaser of the Merger Agreement, the foregoing premises and the mutual covenants, conditions and agreements contained herein and therein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: SECTION 1. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS. Each Stockholder represents and warrants to Parent and Purchaser in respect of himself or itself as follows: (a) The Stockholder is the beneficial owner of, and has good and marketable title to, the number of shares of Company Common Stock set forth opposite the Stockholder's name in SCHEDULE A hereto (as may be adjusted from time to time pursuant to Section 5, the Stockholder's "Shares"). Except for the Stockholder's Shares and any other shares of Common Company Stock subject hereto, the Stockholder is not the record or beneficial owner of any shares of capital stock of the Company other than shares issuable upon the exercise of options and Shares otherwise subject to this Agreement due to their ownership by other Stockholders party hereto. The Stockholder has the sole right to vote such Stockholder's Shares, and none of such Stockholder's Shares is subject to any voting trust or other agreement, arrangement or restriction with respect to the voting of such Stockholder's Shares, except as contemplated by this Agreement. (b) This Agreement has been duly authorized, executed and delivered by the Stockholder and constitutes the legal, valid and binding obligation of the Stockholder, enforceable against the Stockholder in accordance with its terms, subject to applicable bankruptcy, insolvency, moratorium or other similar laws relating to creditors' rights and general principles of equity. Neither the execution and delivery of this Agreement nor the consummation by the Stockholder of the transactions contemplated hereby will result in a violation of, or a default under, or conflict with, any contract, trust, commitment, agreement, understanding, arrangement or restriction of any kind to which the Stockholder is a party or bound or to which the Stockholder's Shares are subject. Except for filings under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, consummation by the Stockholder of the transactions contemplated hereby will not violate, or require any consent, approval, or notice under, any provision of any judgment, order, decree, statute, law, rule or regulation applicable to the Stockholder or the Stockholder's Shares. If the Stockholder is married and the Stockholder's Shares constitute community property or otherwise need spousal or other approval to be legal, valid and binding, this Agreement has been duly authorized, executed and delivered by, and constitutes a valid and binding agreement of, the Stockholder's spouse, enforceable against such spouse in accordance with its terms, except as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally. No trust of which such Stockholder is a trustee requires the consent of any beneficiary to the execution and delivery of this Agreement or to the consummation of the transactions contemplated hereby. Each Stockholder hereby grants to Parent an irrevocable proxy with full power of substitution and resubstitution which shall be deemed coupled with an interest to vote such Stockholder's Shares as contemplated by Sections 3(c) and 4 hereof. (c) The Stockholder's Shares and the certificates representing such Shares are now and at all times during the term hereof will be held by the Stockholder, or by a nominee or custodian for the benefit of the Stockholder, free and clear of all liens, claims, security interests, proxies, voting trusts or agreements, understandings or arrangements or any other encumbrances whatsoever, except for any such encumbrances or proxies arising hereunder and except for such liens and encumbrances that will not interfere with the Stockholder's ability to perform his or its obligations hereunder. (d) No broker, investment banker, financial adviser or other person is entitled to any broker's, finder's, financial adviser's or other similar fee or commission from Parent, Purchaser or the Company in connection with the transactions contemplated hereby based upon arrangements made by or on behalf of the Stockholder in his individual capacity. (e) The Stockholder understands and acknowledges that Parent is entering into, and causing Purchaser to enter into, the Merger Agreement in reliance upon the Stockholder's execution and delivery of this Agreement. 2 SECTION 2. AGREEMENT TO TENDER OR SELL. (a) Each Stockholder hereby agrees that he shall tender all of his Shares into the Offer (as defined in the Merger Agreement) and that he shall not withdraw any Shares so tendered. The parties agree that each of the Stockholders will, for all Shares tendered thereby in the Offer and accepted for payment by Purchaser, receive a price for each of its Shares equal to $21.00, or such higher per share consideration paid to other stockholders who have tendered into the Offer. (b) Each Stockholder hereby agrees to enter into such agreements and take such actions as are necessary to provide that all Options held by such Stockholder are cashed out in connection with the Merger. SECTION 3. COVENANTS. Each Stockholder, severally and not jointly, agrees with, and covenants to, Parent and Purchaser as follows: (a) The Stockholder shall not, except as contemplated by the terms of this Agreement, (i) transfer (the term "transfer" shall include, without limitation, for the purposes of this Agreement, any sale, gift, pledge or other disposition), any or all of the Stockholder's Shares or any interest therein, (ii) enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of such Shares or any interest therein, (iii) grant any proxy, power-of-attorney or other authorization or consent in or with respect to such Shares, (iv) deposit such Shares into a voting trust or enter into a voting agreement or arrangement with respect to such Shares or (v) subject to Section 7, take any other action that would in any way restrict, limit or interfere with the performance of his obligations hereunder or the transactions contemplated hereby. Notwithstanding anything to the contrary provided in this Agreement, the Stockholder shall have the right to transfer Shares to (i) any Family Member (as defined below), (ii) the trustee or trustees of a trust solely (except for remote contingent interests) for the benefit of the Stockholder and/or one or more Family Members, (iii) a charitable remainder trust for the benefit of the Stockholder and/or one or more Family Members and/or designated charities, (iv) a partnership of which the Stockholder or a Family Member owns all of the partnership interests or (v) the executor, administrator personal representative of the estate of the Stockholder; PROVIDED, THAT in the case of any such transfer, the transferee shall execute an agreement to be bound by the terms of this Agreement. "Family Member" shall mean (i) the Stockholder's spouse and (ii) any other natural person who is a lineal descendant of the Stockholder or the Stockholder's spouse or is related to the Stockholder or the Stockholder's spouse within the second degree. (b) The Stockholder shall not, nor shall he permit any investment banker, attorney or other adviser or representative of the Stockholder to, directly or indirectly, (i) solicit, initiate or encourage the submission of, any Acquisition Proposal or (ii) participate in any discussions or negotiations regarding, or furnish to any person any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to any Acquisition Proposal. Without limiting the foregoing, it is understood that any violation of the restrictions set forth in the preceding sentence by an investment banker, attorney or 3 other adviser or representative of the Stockholder shall be deemed to be a violation of this Section 3(b) by the Stockholder. (c) At any meeting of stockholders of the Company called to vote upon the Merger and the Merger Agreement or at any adjournment thereof or in any other circumstances upon which a vote, consent or other approval (including by written consent) with respect to the Merger and the Merger Agreement is sought, the Stockholder shall, including by initiating a written consent solicitation if requested by Parent, vote (or cause to be voted) the Stockholder's Shares in favor of the Merger, the adoption by the Company of the Merger Agreement and the approval of the terms thereof and each of the other transactions contemplated by the Merger Agreement. (d) Until after the Merger is consummated or the Merger Agreement is terminated, the Stockholder shall use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Merger and the other transactions contemplated by the Merger Agreement. SECTION 4. COMPETING TRANSACTIONS. Each Stockholder hereby agrees to vote against or refrain from giving any consent in favor of, and not to tender his shares into any offer relating to, (i) any merger agreement or merger (other than the Merger Agreement and the Merger), consolidation, combination, sale of substantial assets, reorganization, joint venture, recapitalization, dissolution, liquidation or winding up of or by the Company and (ii) any amendment of the Company's certificate of incorporation or by-laws or other proposal or transaction including any consent solicitation to remove or elect any directors of the Company) involving the Company or any of its subsidiaries which amendment or other proposal or transaction would in any manner impede, frustrate, prevent or nullify, or result in a breach of any covenant, representation or warranty or any other obligation or agreement of the Company under or with respect to, the Offer, the Merger, the Merger Agreement or any of the other transactions contemplated by the Merger Agreement (each of the foregoing in clause (i) or (ii) above, a "Competing Transaction"). SECTION 5. CERTAIN EVENTS. Each Stockholder agrees that this Agreement and the obligations hereunder shall attach to the Stockholder's Shares and shall be binding upon any person or entity to which legal or beneficial ownership of such Shares shall pass, whether by operation of law or otherwise, including without limitation the Stockholder's heirs, guardians, administrators or successors. In the event of any stock split, stock dividend, merger, reorganization, recapitalization or other change in the capital structure of the Company affecting the Company Common Stock, or the acquisition of additional shares of Company Common Stock or other securities or rights of the Company by any Stockholder, the number of Shares listed on SCHEDULE A beside the name of the Stockholder shall be adjusted appropriately and this Agreement and the obligations hereunder shall attach to any additional shares of Company Common Stock or other securities or rights of the Company issued to or acquired by the Stockholder. 4 SECTION 6. VOIDABILITY. If prior to the execution hereof, the board of directors of the Company shall not have duly and validly authorized and approved by all necessary corporate action the acquisition of Company Common Stock by Parent and Purchaser and the other transactions contemplated by this Agreement and the Merger Agreement, so that by the execution and delivery hereof Parent or Purchaser would become, or could reasonably be expected to become, an "interested stockholder" with whom the Company would be prevented for any period pursuant to Section 203 of the Delaware General Corporation Law from engaging in any "affiliated transaction" (as such terms are defined in Section 203 of the Delaware General Corporation Law), then this Agreement shall be void and unenforceable until such time as such authorization and approval shall have been duly and validly obtained. SECTION 7. STOCKHOLDER CAPACITY. No person executing this Agreement who is or becomes during the term hereof a director or officer of the Company makes any agreement or understanding herein in his capacity as such director or officer. Each Stockholder signs solely in his capacity as the record holder and beneficial owner of, or the trustee of a trust whose beneficiaries are the beneficial owners of, such Stockholder's Shares and nothing herein shall limit or affect any actions taken by a Stockholder in his capacity as an officer or director of the Company to the extent specifically permitted by the Merger Agreement. SECTION 8. FURTHER ASSURANCES. Each Stockholder shall, upon request of Parent or Purchaser, execute and deliver any additional documents and take such further actions as may reasonably be deemed by Parent or Purchaser to be necessary or desirable to carry out the provisions hereof. SECTION 9. TERMINATION. This Agreement, and all rights and obligations of the parties hereunder, shall terminate upon the earlier of (a) the date upon which the Merger Agreement is terminated in accordance with its terms or (b) the date that Parent, Purchaser or the Company shall have purchased and paid for the Shares of the Stockholders pursuant to Section 2; PROVIDED, HOWEVER, that the termination of this Agreement shall not relieve any party of liability for breach of this Agreement prior to termination. SECTION 10. PUBLIC ANNOUNCEMENTS. Each Stockholder will consult with Parent before issuing, and provide Parent with the opportunity to review an comment upon, any press release or other public statements with respect to the transactions contemplated by this Agreement and the Merger Agreement, and shall not issue any such press release or make any such public statement prior to such consultation, except as may be required by applicable law, court process or by obligations pursuant to any listing agreement with any national securities exchange. SECTION 11. MISCELLANEOUS. (a) Capitalized terms used and not otherwise defined in this Agreement shall have the respective meanings assigned to such terms in the Merger Agreement. (b) All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given if delivered personally or sent by overnight courier (providing proof of delivery) to the parties at the 5 following addresses (or at such other address for a party as shall be specified by like notice): (i) if to Parent or Purchaser, to the address set forth in the Merger Agreement; and (ii) if to any Stockholder, to the address set forth on SCHEDULE A hereto, or such other address as may be specified in writing by such Stockholder. (c) Headings of Sections of this Agreement are for the convenience of the parties only, and shall be given no substantive or interpretive effect whatsoever. (d) This Agreement may be executed by the parties in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. Each counterpart may consist of a number of copies of this Agreement each signed by less than all, but together signed by all of the parties hereto. This Agreement shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. (e) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without regard to its rules of conflict of laws or those of any other jurisdiction. (f) Each of the parties hereto (1) (A) consents to submit itself to the personal jurisdiction of any Federal court located in the State of Delaware or any Delaware state court in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement and (B) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, and (2) (A) agrees that any action under this Agreement may also be brought in any Federal or state court located in the City of New York, Borough of Manhattan and (B) agrees that it will not by motion or other action contest the bringing of any such action in the above mentioned courts rather than in any other venue or forum. (g) Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise, by any of the parties without the prior written consent of the other parties, except by laws of descent. Any assignment in violation of the foregoing shall be void. (h) If any term, provisions, covenant or restriction herein, or the application thereof of any circumstance, shall, to any event, be held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions herein and the application thereof to any other circumstances, shall remain in full force and effect, shall not in any way be affected, impaired or invalidated, and shall be enforced to the fullest extent permitted by law. (i) The parties hereto agree that irreparable damage would occur if any of the provisions of this Agreement was not performed in accordance with its specific terms or as otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce 6 specifically the terms and provisions of this Agreement in any court referred to in Section 11(f) of this Agreement, this being in addition to any other remedy to which they are entitled at law or in equity. In any such action for specific performance, no party will be required to post a bond. (j) No amendment, modification or waiver in respect of this Agreement shall be effective against any parry unless it shall be in writing and signed by such party. (k) This Agreement may be executed by facsimile signatures by any party and such signature shall be deemed binding for all purposes hereof, without delivery of an original signature being thereafter required. (l) This Agreement, including the Schedule hereto, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements, understandings, negotiations, representations and warranties, and discussions, whether oral or written, among the parties hereto, with respect to the subject matter hereof. There are no conditions, covenants, agreements, representations, warranties or other provisions, express or implied, collateral, statutory or otherwise, relating to the subject matter of this Agreement. No prior drafts of this Agreement or portions thereof shall be admissible into evidence in any action, suit or other proceeding involving this Agreement. (m) Whenever this Agreement requires Purchaser to take any action, such requirement shall be deemed to include an undertaking on the part of Parent to cause Purchaser to take such action and a guarantee of the performance thereof. 7 IN WITNESS WHEREOF, Parent, Purchaser and the Stockholders have caused this Agreement to be duly executed and delivered as of the date first written above. INTERNATIONAL PAPER COMPANY By: /s/ David W. Oskin --------------------------- Name: David W. Oskin Title: Executive Vice President INTERNATIONAL PAPER - 37, INC. By: /s/ James W. Guedry --------------------------- Name: James W. Guedry Title: Presidents /s/ Andrew N. Shore -------------------------- Andrew N. Shore /s/ Marc P. Shore -------------------------- Marc P. Shore SHORE FAMILY PARTNERSHIP, L.P. By: SHORE FAMILY LLC, as sole general partner By: /s/ Marc P. Shore --------------------------- Name: Marc P. Shore Title: Manager PAUL SHORE ESTATE MARITAL TRUST By: /s/ Marc P. Shore --------------------------- Name: Marc P. Shore Title: Trustee /s/ Howard M. Liebman --------------------------- Howard M. Liebman S-1 PAUL SHORE MARITAL TRUST By: /s/ Marc P. Shore --------------------------- Name: Marc P. Shore Title: Trustee S-2 SCHEDULE A
- -------------------------------------------------------------------------------- NUMBER OF SHARES OF NAME AND ADDRESS OF STOCKHOLDER COMPANY COMMON STOCK - -------------------------------------------------------------------------------- Shore Family Partnership, L.P. 2,700,000 c/o Shorewood Packaging Corporation 277 Park Avenue New York, NY 10172-0124 - -------------------------------------------------------------------------------- Marc P. Shore 1,007,687 c/o Shorewood Packaging Corporation 277 Park Avenue New York, NY 10172-0124 - -------------------------------------------------------------------------------- Paul Shore Estate Marital Trust (testamentary 586,062 trust) c/o Shorewood Packaging Corporation 277 Park Avenue New York, NY 10172-0124 - -------------------------------------------------------------------------------- Andrew N. Shore 163,402 c/o Shorewood Packaging Corporation 277 Park Avenue New York, NY 10172-0124 - -------------------------------------------------------------------------------- Paul Shore Marital Trust 108,258 c/o Shorewood Packaging Corporation 277 Park Avenue New York, NY 10172-0124 - -------------------------------------------------------------------------------- Howard M. Liebman 86,736 1302 Azure Place Hewlett Harbor, NY 11557 - --------------------------------------------------------------------------------
EX-99.(D)(3) 12 EXHIBIT 99(D)(3) Exhibit (d)(3) February 16, 2000 Mr. Marc P. Shore 68 Talcott Road Rye, New York 10573 Re: Employment Agreement Dear Mark: As you know, International Paper Company, a New York corporation ("Parent"), International Paper-37, Inc., a Delaware corporation and a direct wholly owned subsidiary of Parent ("Purchaser") and Shorewood Packaging Corporation, a Delaware corporation (the "Company") have entered into discussions relating to a proposal to engage in transactions including (a) the commencement of an offer by Purchaser to purchase all of the outstanding shares of common stock of the Company (the "Proposed Offer") and (b) the merger of Purchaser with and into the Company, with the Company continuing as the surviving corporation and a direct wholly owned subsidiary of Parent (the "Proposed Merger")(such transactions are hereinafter together referred to as the "Proposed Transactions"). As Parent has made clear to you in discussions relating to the Proposed Transactions, Parent is willing to proceed with the Proposed Transactions based upon your representation that you agree to remain employed by the Company upon the terms and conditions set forth in the employment agreement attached hereto as EXHIBIT A (the "Employment Agreement"), and would be unwilling to proceed if you did not so agree. In addition, the Company has adopted an Employee Severance Plan that provides certain benefits if your employment terminates under certain conditions following a Change in Control (as defined in the Company Employee Severance Plan) of the Company. Finally, the Company has made loans to you that are currently outstanding and which are listed in the schedule attached hereto as EXHIBIT B. In order to assure Parent that you will remain employed by the Company on and after the date of Purchaser's first purchase of the Company's common stock pursuant to the Proposed Offer (the "First Purchase Date") if the Proposed Transactions are consummated, and for other good and valuable consideration, this letter agreement (the "Agreement") sets forth the agreements and understandings between you and Parent with respect to these matters. Section 1. EMPLOYMENT AGREEMENT. Simultaneously with your execution of this letter you will execute the Employment Agreement. Parent will execute and cause the Company to execute the Employment Agreement on the First Purchase Date. The Employment Agreement will automatically become effective upon execution by Parent and the Company on the First Purchase Date. Section 2. REPAYMENT OF LOANS. On the First Purchase Date you will repay to the Company the entire outstanding principal balance on each loan listed in the schedule attached hereto as EXHIBIT B, together with interest accrued through the First Payment Date. Section 3. EMPLOYEE SEVERANCE PLAN. On the First Payment Date, Parent will cause the Company to pay to you a lump sum payment of Severance Pay (as defined in the Company Severance Plan) in the amount of $5,699,475.72 and the Gross-Up Payment (as defined in the Company's Employee Severance Plan) determined in accordance with the applicable terms of the Employee Severance Plan. Section 4. GOVERNING LAW. The provisions of this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York without regard to principles of conflicts of laws. If the foregoing terms are acceptable to you, please sign and return to Parent the enclosed copy of this letter and the enclosed Employment Agreement, whereupon this letter shall become a binding agreement between you and Parent. Sincerely, INTERNATIONAL PAPER COMPANY By: /s/ David W. Oskin ------------------------------------- David W. Oskin Executive Vice President Accepted and Agreed as of the date first written above /s/ Marc P. Shore - ------------------------- Marc P. Shore 2 EXHIBIT A EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") is entered into on this __th day of ___________, 2000 by and among Marc P. Shore ("Executive"), International Paper Company ("International Paper"), a New York corporation, and Shorewood Packaging Corporation (the "Company"), a Delaware corporation having its principal executive offices at 277 Park Avenue, New York, New York 10172. I. EMPLOYMENT. The Company hereby employs Executive and Executive hereby accepts such employment, upon the terms and conditions hereinafter set forth, from ____________, 2000 to and including December 31, 2004 (hereinafter the "Term"), unless earlier terminated under Section V of this Agreement. II. DUTIES. A. Executive shall serve during the course of his employment as President of the Company and shall perform such duties as may from time to time be assigned, delegated or limited by the senior officer of International Paper designated in writing by the Chief Executive Officer of International Paper, which shall initially be the Senior Vice President-Consumer Packaging of International Paper, (such senior officer is hereinafter referred to as the "IP Officer") consistent with Executive's position as President of the Company. Executive shall report directly to the IP Officer. During the Term of this Agreement, Executive shall devote all of his professional and business-related time, energy and skill to the business of the Company and shall perform his duties in good faith. B. Executive shall not, without the prior written consent of the IP Officer, render to others any services of any kind for compensation or engage in any activity which conflicts or interferes with the performance of his duties and obligations hereunder. C. Neither International Paper nor the Company shall be deemed to have breached this Agreement if the Company is liquidated to become a division of International Paper instead of a separate subsidiary provided that Executive becomes the President of such division. If such a liquidation occurs, "Company" shall thereafter mean International Paper. D. In connection with his employment hereunder, Executive shall not be required, without his consent, to be based anywhere other than the greater metropolitan New York City area, which shall include Purchase, New York. III. PRIOR AGREEMENT. Executive and the Company are currently parties to that certain Amended and Restated Employment Agreement made effective as of May 3, 1998 (the "Prior Agreement"). Company and Executive agree that from and after execution of this Agreement, all further obligations of the parties under the Prior Agreement shall cease and become null and void, except as to (A) the Company's obligation to pay to Executive any salary earned prior to execution of this Agreement and not yet paid and (B) Executive's obligation to repay the unearned portion of the $1 million signing bonus that the Company paid to him in connection with the original execution of the Prior Agreement in the event that he is terminated by the Company for Cause as defined in Section V-C1 or he terminates his employment with the Company without Good Reason (as defined in Section V-C) prior to May 1, 2003. 2 IV. COMPENSATION. A. SALARY. The Company will pay to Executive a base salary at the rate of $500,000 per year. Such salary shall be earned monthly and shall be payable in periodic installments no less frequently than monthly in accordance with the Company's customary practices. Any increases in Executive's base salary will be at the discretion of the IP Officer. B. ANNUAL BONUS. During the Term of this Agreement, Executive shall be entitled to receive an annual bonus from the Company in accordance with an annual bonus plan for Executive (the "Bonus Plan") in lieu of any further bonuses under the 1995 Performance Bonus Plan of Shorewood Packaging Corporation. The IP Officer shall establish reasonable target performance objectives for Executive under the Bonus Plan for the year 2000. For each subsequent year ending during the Term of this Agreement, the IP Officer shall establish reasonable target performance objectives under the Bonus Plan on or before January 31 of the year for which the bonus may be earned. Executive's bonus under the Bonus Plan for each calendar year ending during the Term of this Agreement will be determined on the basis of the satisfaction of the target performance objectives in accordance with the following table:
PERCENT OF TARGET BONUS ----------------- ----- below 80% $0 80% $250,000 100% $350,000 at or above 125% $450,000
The amount of the bonus payable to Executive for satisfaction of performance objectives above the 80% level and below the 125% level will be determined using linear interpolation. Notwithstanding the foregoing, for the period ending December 31, 2000, the amount of the bonus that Executive is eligible to earn under the Bonus Plan shall be equal to 75% of the amounts shown in the above table. The Company shall pay any bonus that Executive earns 3 under the Bonus Plan on or before March 15 of the year following the year in which Executive earns such bonus. In the event Executive's employment with the Company terminates on or after July 1 of a year during the Term of this Agreement on account of Executive's death, Disability or termination of his employment with Good Reason, or the Company's termination of his employment without Cause, Executive (or his beneficiary or estate) shall be entitled to a bonus under the Bonus Plan in an amount equal to the 100% target bonus for the year prorated for the number of days during the year that Executive was employed by the Company. No bonus will be payable under the Bonus Plan for a year if (1) his employment terminates for any reason prior to July 1 of such year, (2) the Company terminates Executive with Cause or (3) Executive terminates his employment without Good Reason. C. GUARANTEED BONUS. In addition to any bonus Executive earns under the Bonus Plan, the Company shall pay to Executive (1) a separate guaranteed bonus of $112,000 for the period of service from the date of this Agreement through December 31, 2000, and (2) a separate guaranteed bonus of $150,000 for each subsequent calendar year ending during the Term of this Agreement. The Company shall pay each such guaranteed bonus to Executive on or before February 15 of the year following the year for which the guaranteed bonus is paid. D. RESTRICTED STOCK AWARD. Effective as of the date of this Agreement, International Paper shall grant to Executive, in accordance with the International Paper Company Long-Term Incentive Compensation Plan (the "Stock Incentive Plan"), that number of shares of common stock of International Paper having a fair market value as of the date of this Agreement of $1 million, which shares shall be nontransferable and subject to forfeiture until vested in accordance with the vesting schedule set forth in the award agreement (the "Restricted Stock"). The award agreement for the Restricted Stock shall provide that one-fifth of Restricted Stock will vest on 4 December 31, 2000 and on December 31 of each of the four subsequent years provided that the target performance objectives established under the Bonus Plan for each such year are achieved. If in any year shares of Restricted Stock do not vest because of the failure to satisfy the target performance objectives for that year, those shares shall vest on December 31 of the first subsequent year ending on or before December 31, 2004 for which the target performance objectives are achieved. Any shares of Restricted Stock which have not vested as of December 31, 2004, shall be permanently forfeited, and neither International Paper nor the Company shall have any obligations to Executive with respect to such forfeited shares. The award agreement for the Restricted Stock shall also provide that all of Executive's shares of Restricted Stock will immediately vest and be non-forfeitable in the event Executive's employment is terminated on account of death or Disability, he terminates his employment with Good Reason or the Company terminates his employment without Cause. E. STOCK OPTIONS. Effective as of the date of this Agreement, International Paper shall grant to Executive a nonqualified stock option under the Stock Incentive Plan to purchase 20,000 shares of International Paper common stock at a price per share equal to the fair market value of International Paper common stock on the date of this Agreement. Such option grant shall be evidenced by a standard stock option agreement in the form used by International Paper for the grant of other stock options under the Stock Incentive Plan and shall contain vesting and other terms which are consistent with the grants of stock options made to other executives of International Paper and its subsidiaries. Each year thereafter during the Term of this Agreement, Executive shall be eligible to receive such additional stock option awards under the Stock Incentive Plan or any successor plan as the Board of Directors of International Paper (or its delegate) determines in its sole discretion. 5 F. For a one-year period of time following the effective date of the merger of the Company with International Paper-37, Inc., (the "Effective Time"), the Company shall provide Executive with benefits that are substantially comparable in the aggregate to the benefits provided to Executive as of the date of the merger agreement between the Company and International Paper-37, Inc.; PROVIDED, HOWEVER, that the Company will continue Executive's current split-dollar life insurance arrangement only through December 31, 2000, and the Company will provide Executive an automobile lease allowance of $2,250 per month plus reimbursement for reasonable insurance, maintenance, gasoline and parking expenses incurred in furtherance of the Company's business only through December 31, 2000. After the one-year period following the Effective Time, the following provisions will apply: 1. SAVINGS AND RETIREMENT PLANS. Executive shall be entitled to participate in all savings and retirement plans, practices, policies and programs to the extent applicable generally to other peer executives of International Paper. 2. WELFARE BENEFIT PLANS. Executive shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by International Paper (including, without limitation, medical, dental, disability, group life insurance, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of International Paper. 3. FRINGE BENEFITS; VACATION. Executive shall be entitled to fringe benefits and paid vacation in accordance with the plans, practices, programs and policies as in effect generally with respect to other peer executives of International Paper. 4. International Paper and the Company reserve the right to modify, suspend or discontinue any and all of the above plans, practices, policies and programs at any time 6 without recourse by Executive so long as such action is taken generally with respect to other similarly situated peer executives and does not single out Executive. V. TERMINATION. A. DEATH. Executive's employment shall terminate automatically upon Executive's death. B. DISABILITY. If the Company determines in good faith that Executive has become disabled (physically or mentally), it may give to Executive written notice in accordance with Section XV of this Agreement of its intention to terminate Executive's employment. In such event, Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by Executive, provided that, within the 30 days after such receipt, Executive shall not have returned to full-time performance of his duties. For purposes of this Agreement, disability shall mean a physical or mental impairment that renders Executive unable to perform the essential functions of his position. The Company reserves the right, in good faith, to make the determination of disability under this Agreement based upon information supplied by Executive and/or his medical personnel, as well as information from medical personnel (or others) selected by the Company or its insurers. C. CAUSE OR GOOD REASON. 1. The Company may terminate Executive's employment for Cause. For purposes of this Agreement, "Cause" shall mean that the Company, acting in good faith based upon the information then known to the Company, determines that Executive has engaged in or committed: willful misconduct; gross negligence; theft, fraud or other illegal conduct; refusal or unwillingness to perform his duties or performance of his duties in an unsatisfactory manner; sexual harassment; conduct which reflects adversely 7 upon, or making any remarks disparaging of, the Company or International Paper, their Boards of Directors, officers, directors, advisors or employees or their affiliates or subsidiaries; insubordination; any willful act that is likely to and which does in fact have the effect of injuring the reputation, business or a business relationship of the Company or International Paper; violation of any fiduciary duty; violation of any duty of loyalty; and breach of any term of this Agreement. 2. Executive may terminate his employment for Good Reason. For purposes of this Agreement, "Good Reason" shall mean a material breach of this Agreement by the Company or International Paper. D. OTHER THAN CAUSE OR DEATH OR DISABILITY. The Company may terminate Executive's employment at any time, with or without Cause, by written notice to Executive, effective upon Executive's receipt of such notice. E. OBLIGATIONS OF THE COMPANY UPON TERMINATION. 1. DEATH OR DISABILITY. If Executive's employment is terminated by reason of Executive's death or Disability, this Agreement shall terminate without further obligations to Executive or his legal representatives under this Agreement, other than for (a) payment of the sum of (i) Executive's annual base salary through the date of termination to the extent not theretofore paid, (ii) any guaranteed bonus or performance bonus under the Bonus Plan for the calendar year ending prior to Executive's death or Disability to the extent not theretofore paid, (iii) any prorated bonus payable under the Bonus Plan pursuant to Section IV-B and (iv) and any accrued vacation pay to the extent not theretofore paid (the sum of the amounts described in clauses (i), (ii), (iii) and (iv) shall be hereinafter referred to as the "Accrued Obligations"), which shall be paid to 8 Executive or his estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the date of termination. 2. CAUSE. If the Company terminates Executive's employment for Cause, this Agreement shall terminate without further obligations to Executive other than for the timely payment of Accrued Obligations. If it is subsequently determined that the Company did not have Cause for termination under Section V-C, then the Company's decision to terminate shall be deemed to have been made under Section V-D and the amounts payable under Section V-E3 shall be the only amounts Executive may receive for his termination. 3. OTHER THAN CAUSE OR DEATH OR DISABILITY; GOOD REASON. If the Company terminates Executive's employment for other than Cause or death or Disability during the Term of this Agreement, or if Executive terminates his employment with the Company with Good Reason, this Agreement shall terminate without further obligations by the Company or International Paper to Executive other than (a) the timely payment of Accrued Obligations, and (b), subject to Executive's signing a release in the standard form then in use by the Company or International Paper for other peer executives, (i) severance pay (payable in regular installments in accordance with the Company's normal payroll practices) constituting Executive's base salary for the lesser of one year or the remaining Term of this Agreement and (ii) the amount of the guaranteed bonus for the calendar year during which Executive's employment with the Company terminates. 9 4. EXPIRATION OF AGREEMENT. If this Agreement expires at the end of the Term and Executive ceases to be employed by the Company at that time, Executive will receive timely payment of the Accrued Obligations. 5. EXCLUSIVE REMEDY. Executive agrees that the payments contemplated by this Agreement shall constitute the exclusive and sole remedy for any termination of his employment and Executive covenants not to assert or pursue any other remedies, at law or in equity, with respect to any termination of employment. Notwithstanding the preceding sentence, neither the severance pay described in Section V-E3 nor any other payment under this Section V-E shall reduce or affect any benefits the Executive (or his estate or beneficiary) may be entitled to under the specific terms of the benefit plans of the Company or any stock option or restricted stock awards. VI. COVENANTS OF EXECUTIVE. A. GENERAL: Executive and the Company understand and agree that the purpose of the provisions of this Section VI is to protect the legitimate business interests of the Company and International Paper, as more fully described below. Executive hereby acknowledges that the restrictions set forth in this Section VI are reasonable and necessary to protect the business interests of the Company and/or International Paper. Therefore, Executive shall be subject to the restrictions set forth in this Section. B. RESTRICTIONS ON DISCLOSURE AND USE OF CONFIDENTIAL INFORMATION: Executive understands and agrees that confidential information and materials of a confidential or proprietary nature constitute valuable assets of the Company and International Paper and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that he shall not, directly or indirectly, at any time during the Term and at any time following the Term, 10 reveal, divulge or disclose any "Confidential Information" (as defined below), and Executive shall not, directly or indirectly, use or make use of any "Confidential Information" in connection with any business activity other than that of the Company and/or International Paper; PROVIDED, HOWEVER, that Executive may disclose or use "Confidential Information" during the Term as authorized by the IP Officer or consistent with the proper exercise of Executive's duties as President of the Company. "Confidential Information" means all information regarding the Company and/or International Paper, its and their activities, business, clients, or potential clients that is the subject of reasonable efforts by the Company and/or International Paper to maintain its confidentiality and that is not generally disclosed to persons not employed by the Company and/or International Paper. "Confidential Information" shall include, but is not limited to, any of the following information or materials of the Company and/or International Paper: financial plans and data; management planning information; business plans; operational methods; market studies; marketing plans or strategies; product development techniques or plans; customer lists; details of customer contracts; current and anticipated customer requirements; past, current and planned research and development; business acquisition plans; and new personnel acquisition plans. "Confidential Information" shall not include information that has become generally available to the public. C. NONSOLICITATION. Executive understands and agrees that the relationship between the Company and/or International Paper and their respective employees, business relations, clients and customers, and potential clients and customers, constitutes a valuable asset of the Company and/or International Paper and may not be converted to Executive's own use. Accordingly, Executive agrees that, during the Term of this Agreement, and for a period of three (3) years from the termination for any reason pursuant to Section V of this Agreement other than 11 the Company's termination of Executive without Cause or Executive's termination of his employment with Good Reason (the "Restricted Period"), neither Executive nor any entity with whom he is at the time affiliated (any other person, corporation, partnership or other business entity of any kind) shall, directly or indirectly, solicit or entice away or in any manner persuade or attempt to persuade, any officer, employee, agent, representative, business relation, client or customer, or prospective client or customer of the Company and/or International Paper, to discontinue his/her/its relationship or prospective relationship with the Company and/or International Paper. D. RESTRICTIVE COVENANT. Executive acknowledges that his services are special, unique, and extraordinary, and that in the course of his employment with the Company and/or International Paper he has had and will continue to have dealings and develop special relationships with the clients and customers of the Company and/or International Paper. Executive further acknowledges that in the course of his employment with or service to the Company and/or International Paper, he has obtained and will continue to obtain Confidential Information. In order to protect the legitimate business interests, goodwill, relationships, and Confidential Information of the Company and/or International Paper, Executive agrees that during the Restricted Period defined above in Section VI-C, Executive shall not (whether for his own account or on behalf of any person, corporation, partnership, or other business entity of any kind, and whether directly or indirectly), without the prior written consent of the IP Officer, engage in the business of printing or manufacturing paperboard packaging anywhere in North America. Notwithstanding the foregoing, if Executive's employment with the Company terminates on or after the expiration of this Agreement at the end of its Term, Executive shall be 12 subject to the same non-competition policy of International Paper that is applicable to other peer executives of International Paper. E. ENFORCEMENT OF COVENANTS. In the event Executive breaches, or threatens to commit a breach of, any of the provisions of this Section VI, the Company and/or International Paper shall have the following rights and remedies, which shall be independent of any others and severally enforceable, and shall be in addition to, and not in lieu of, any other rights and remedies available to the Company and/or International Paper at law or in equity: 1. the right to enjoin, preliminarily and permanently, Executive from violating or threatening to violate the terms of this Section VI and to have the promises made herein specifically enforced by any court of competent jurisdiction; and 2. the right and remedy to require Executive to account for and pay over to the Company and/or International Paper all compensation, profits, monies, accruals, increments or other benefits derived or received by Executive as a result of the transactions constituting a breach of this Section VI. VII. ARBITRATION. Any and all controversies, claims or disputes arising out of or in any way relating to this Agreement, its enforcement or interpretation, or because of an alleged breach, default, or misrepresentation in connection with any of its provisions, or any other claim by Executive arising out of or in connection with his employment, including any claims for discrimination prohibited by any federal, state or other statute, ordinance or law, shall be submitted to a panel of three (3) arbitrators (hereinafter referred to as the "Panel"). Executive shall select one arbitrator; the Company or International Paper, as the case may be, shall select one arbitrator; and the two arbitrators shall choose the third arbitrator from a list of arbitrators with expertise in employment 13 disputes provided by the American Arbitration Association ("AAA"). Subject to the foregoing, the arbitration shall be in accordance with the National Rules for Resolution of Employment Disputes of the AAA. The arbitration shall be commenced by filing a demand for arbitration with the AAA within sixty (60) days after the occurrence of the facts giving rise to any such controversy, claim or dispute. The arbitration shall be conducted in Purchase, New York. Judgment upon the award rendered by the Panel may be entered in any court having jurisdiction thereof. All costs and expenses of any arbitration proceeding shall be borne by the respective party incurring such costs and expenses. VIII. ASSIGNMENT. Executive acknowledges that his services are unique and personal. Accordingly, Executive may not assign his rights or delegate his duties under this Agreement to any person or entity. IX. SUCCESSORSHIP. This Agreement is binding on and inures to the benefit of the Company and/or International Paper, its successors and assigns. X. MODIFICATION. This Agreement may not be amended or modified other than by a written agreement executed by Executive and the Company or its designee. XI. SAVINGS CLAUSE. If any provision of this Agreement or the application thereof is held invalid, the invalidity shall not affect other provisions or applications of the Agreement which can be given 14 effect without the invalid provisions or applications and to this end the provisions of this Agreement are declared to be severable. XII. COMPLETE AGREEMENT. This Agreement hereby incorporates by reference the letter agreement entered into between Executive and International Paper on February 16, 2000 (the "Letter Agreement"). This Agreement, together with the Letter Agreement, constitutes and contains the entire agreement and final understanding concerning Executive's employment with the Company and the other subject matters addressed herein between the parties. The parties intend it as a complete and exclusive statement of the terms of their agreement. It supersedes and replaces all prior negotiations and all agreements proposed or otherwise, whether written or oral, concerning the subject matter hereof. Any representation, promise or agreement not specifically included in this Agreement shall not be binding upon or enforceable against either party. This is a fully integrated agreement. XIII. GOVERNING LAW. The provisions of this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York without regard to principles of conflict of laws. XIV. PARAGRAPH HEADINGS. Paragraph and other headings contained in this Agreement are for the convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. 15 XV. NOTICES. Any notices to be given under this Agreement by one party to the other may be effected by personal delivery in writing or by mail, registered or certified, postage prepaid with return receipt requested. Mailed notice shall be deemed received as of three (3) days after mailing. Notices by mail shall be sent to the address listed below unless and until notice to a change is given pursuant to this Section: To Executive: Mr. Marc P. Shore 68 Talcott Road Ryebrook, New York 10573 To the Company: Shorewood Packaging Corporation c/o International Paper Company Two Manhattanville Road Purchase, New York 10577 Attn: William Slowikowski XVI. WITHHOLDING. All amounts payable to Executive under this Agreement shall be reduced by any applicable income and employment withholding taxes and other authorized deductions. XVII. SURVIVORSHIP. The respective rights and obligations of the parties hereunder shall survive any termination of Executive's employment to the extent necessary to the intended preservation of such rights and obligations. 16 XVIII. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which will take effect as an original, and all of which shall evidence one and the same Agreement. XIX. REPRESENTATION. The Company, International Paper and Executive represent that they are knowledgeable and sophisticated as to business matters, including the subject matter of this Agreement, that they have read this Agreement and that they understand its terms. The Company, International Paper and Executive acknowledge that, prior to assenting to the terms of this Agreement, they have been given a reasonable amount of time to review it and to negotiate at arm's length as to its contents. The Company, International Paper and Executive agree that the language used in this Agreement is the language chosen by the parties to express their mutual intent, and that they have entered into this Agreement freely and voluntarily and without pressure or coercion from anyone. 17 IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. SHOREWOOD PACKAGING CORPORATION By: -------------------------------- Title: -------------------------- INTERNATIONAL PAPER COMPANY By: -------------------------------- Title: -------------------------- MARC P. SHORE ------------------------------------ EXHIBIT B
Outstanding Date Of Loan Principal Amount Rate of Interest Due Date ------------ ---------------- ---------------- -------- May, 1995 $2,000,000 Applicable Federal May 4, 2000 Rate plus Interest July 26, 1999 $527,316 6.5% October 2, 2000
EX-99.(D)(4) 13 EXHIBIT 99 (D)(4) Exhibit (d)(4) February 16, 2000 Mr. Howard M. Liebman 1302 Azure Place Hewlitt Harbor, New York 11557 Re: Employment Agreement Dear Howard: As you know, International Paper Company, a New York corporation ("Parent"), International Paper-37, Inc., a Delaware corporation and a direct wholly owned subsidiary of Parent ("Purchaser") and Shorewood Packaging Corporation, a Delaware corporation (the "Company") have entered into discussions relating to a proposal to engage in transactions including (a) the commencement of an offer by Purchaser to purchase all of the outstanding shares of common stock of the Company (the "Proposed Offer") and (b) the merger of Purchaser with and into the Company, with the Company continuing as the surviving corporation and a direct wholly owned subsidiary of Parent (the "Proposed Merger")(such transactions are hereinafter together referred to as the "Proposed Transactions"). As Parent has made clear to you in discussions relating to the Proposed Transactions, Parent is willing to proceed with the Proposed Transactions based upon your representation that you agree to remain employed by the Company upon the terms and conditions set forth in the employment agreement attached hereto as EXHIBIT A (the "Employment Agreement"), and would be unwilling to proceed if you did not so agree. In addition, the Company has adopted an Employee Severance Plan that provides certain benefits if your employment terminates under certain conditions following a Change in Control (as defined in the Company Employee Severance Plan) of the Company. Finally, the Company has made loans to you that are currently outstanding and which are listed in the schedule attached hereto as EXHIBIT B. In order to assure Parent that you will remain employed by the Company on and after the date of Purchaser's first purchase of the Company's common stock pursuant to the Proposed Offer (the "First Purchase Date") if the Proposed Transactions are consummated, and for other good and valuable consideration, this letter agreement (the "Agreement") sets forth the agreements and understandings between you and Parent with respect to these matters. Section 1. EMPLOYMENT AGREEMENT. Simultaneously with your execution of this letter you will execute the Employment Agreement. Parent will execute and cause the Company to execute the Employment Agreement on the First Purchase Date. The Employment Agreement will automatically become effective upon execution by Parent and the Company on the First Purchase Date. Section 2. REPAYMENT OF LOANS. On the First Purchase Date you will repay to the Company the entire outstanding principal balance on each loan listed in the schedule attached hereto as EXHIBIT B, together with interest accrued through the First Payment Date. Section 3. EMPLOYEE SEVERANCE PLAN. On the First Payment Date, Parent will cause the Company to pay to you a lump sum payment of Severance Pay (as defined in the Company Severance Plan) in the amount of $1,820,499.00 and the Gross-Up Payment (as defined in the Company's Employee Severance Plan) determined in accordance with the applicable terms of the Employee Severance Plan. Section 4. GOVERNING LAW. The provisions of this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York without regard to principles of conflicts of laws. If the foregoing terms are acceptable to you, please sign and return to Parent the enclosed copy of this letter and the enclosed Employment Agreement, whereupon this letter shall become a binding agreement between you and Parent. Sincerely, INTERNATIONAL PAPER COMPANY By: /s/ David W. Oskin ------------------------- David W. Oskin Executive Vice President Accepted and Agreed as of the date first written above /s/ Howard M. Liebman - ------------------------- Howard M. Liebman 2 EXHIBIT A EMPLOYMENT AGREEMENT This Employment Agreement (the "Agreement") is entered into on this __th day of ___________, 2000 by and among Howard M. Liebman ("Executive"), International Paper Company ("International Paper"), a New York corporation, and Shorewood Packaging Corporation (the "Company"), a Delaware corporation having its principal executive offices at 277 Park Avenue, New York, New York 10172. I. EMPLOYMENT. The Company hereby employs Executive and Executive hereby accepts such employment, upon the terms and conditions hereinafter set forth, from ____________, 2000 to and including December 31, 2002 (hereinafter the "Term"), unless earlier terminated under Section V of this Agreement. II. DUTIES. A. Executive shall serve during the course of his employment as Executive Vice-President of the Company and shall perform such duties as may from time to time be assigned, delegated or limited by the President of the Company. Executive shall report directly to the President of the Company. During the Term of this Agreement, Executive shall devote all of his professional and business-related time, energy and skill to the business of the Company and shall perform his duties in good faith. B. Executive shall not, without the prior written consent of the senior officer of International Paper designated in writing by the Chief Executive Officer of International Paper, which shall initially be the Senior Vice President-Consumer Packaging of International Paper, (such senior officer is hereinafter referred to as the "IP Officer"), render to others any services of any kind for compensation or engage in any activity which conflicts or interferes with the performance of his duties and obligations hereunder. C. Neither International Paper nor the Company shall be deemed to have breached this Agreement if the Company is liquidated to become a division of International Paper provided that Executive remains employed by such division and reports directly to the President or other head of such division. If such a liquidation occurs, "Company" shall thereafter mean International Paper. D. In connection with his employment hereunder, Executive shall not be required, without his consent, to be based anywhere other than the greater metropolitan New York City area, which shall include Purchase, New York. III. PRIOR AGREEMENT. Executive and the Company are currently parties to that certain Amended and Restated Employment Agreement made effective as of May 3, 1998 (the "Prior Agreement"). Company and Executive agree that from and after execution of this Agreement, all further obligations of the parties under the Prior Agreement shall, except as to salary earned prior to execution of this Agreement and not yet paid, cease and become null and void. IV. COMPENSATION. A. SALARY. The Company will pay to Executive a base salary at the rate of $350,000 per year. Such salary shall be earned monthly and shall be payable in periodic installments no less frequently than monthly in accordance with the Company's customary practices. Any increases in Executive's base salary will be at the discretion of the IP Officer. 2 B. ANNUAL BONUS. During the Term of this Agreement, Executive shall be entitled to receive an annual bonus from the Company in accordance with an annual bonus plan for Executive (the "Bonus Plan"). The IP Officer shall establish reasonable target performance objectives for Executive under the Bonus Plan for the year 2000. For each subsequent year ending during the Term of this Agreement, the IP Officer shall establish reasonable target performance objectives under the Bonus Plan on or before January 31 of the year for which the bonus may be earned. Executive's bonus under the Bonus Plan for each calendar year ending during the Term of this Agreement will be determined on the basis of the satisfaction of the target performance objectives in accordance with the following table:
PERCENT OF TARGET BONUS below 80% $0 80% $140,000 100% $175,000 at or above 125% $215,000
The amount of the bonus payable to Executive for satisfaction of performance objectives above the 80% level and below the 125% level will be determined using linear interpolation. Notwithstanding the foregoing, for the period ending December 31, 2000, the amount of the bonus that Executive is eligible to under the Bonus Plan shall be equal to 75% of the amounts shown in the above table. The Company shall pay any bonus that Executive earns under the Bonus Plan on or before March 15 of the year following the year in which Executive earns such bonus. In the event Executive's employment with the Company terminates on or after July 1 of a year during the Term of this Agreement on account of Executive's death, Disability or termination of his employment with Good Reason, or the Company's termination of his employment without Cause, Executive (or his beneficiary or estate) shall be entitled to a bonus under the Bonus Plan in an amount equal to the 100% target bonus for the year prorated for the 3 number of days during the year that Executive was employed by the Company. No bonus will be payable under the Bonus Plan for a year if (1) his employment terminates for any reason prior to July 1 of such year, (2) the Company terminates Executive with Cause or (3) Executive terminates his employment without Good Reason. C. RESTRICTED STOCK. Effective as of the date of this Agreement, International Paper shall grant to Executive, in accordance with the International Paper Company Long-Term Incentive Compensation Plan (the "Stock Incentive Plan"), that number of shares of common stock of International Paper having a fair market value as of the date of this Agreement of $100,000, which shares shall be nontransferable and subject to forfeiture until vested in accordance with the vesting schedule set forth in the award agreement (the "Restricted Stock"). The award agreement for the Restricted Stock shall provide that Executive's shares of Restricted Stock will vest on December 31, 2002 provided that Executive remains employed until that date. The award agreement for the Restricted Stock shall also provide that all of Executive's shares of Restricted Stock will immediately vest and be non-forfeitable in the event Executive's employment is terminated on account of death or Disability, he terminates employment with Good Reason or the Company terminates his employment without Cause. If Executive's employment terminates for any other reason prior to December 31, 2000, his shares of Restricted Stock shall be permanently forfeited, and neither International Paper nor the Company shall have any obligations to Executive with respect to such forfeited shares. D. STOCK OPTIONS. Effective as of the date of this Agreement, International Paper shall grant to Executive a nonqualified stock option under the Stock Incentive Plan to purchase 10,000 shares of International Paper common stock at a price per share equal to the fair market value of International Paper common stock on the date of this Agreement. Such option grant 4 shall be evidenced by a standard stock option agreement in the form used by International Paper for the grant of other stock options under the Stock Incentive Plan and shall contain vesting and other terms which are consistent with the grants of stock options made to other executives of International Paper and its subsidiaries. Each year thereafter during the Term of this Agreement, Executive shall be eligible to receive such additional stock option awards under the Stock Incentive Plan or any successor plan as the Board of Directors of International Paper (or its delegate) determines in its sole discretion. E. For a one-year period of time following the effective date of the merger of the Company with International Paper-37, Inc. (the "Effective Time"), the Company shall provide Executive with benefits that are substantially comparable in the aggregate to the benefits provided to Executive as of the date of the merger agreement between the Company and International Paper-37, Inc.; PROVIDED, HOWEVER, that the Company will continue Executive's current split-dollar life insurance arrangement only through December 31, 2000, and the Company will provide Executive an automobile lease allowance of $1,000 per month plus reimbursement for reasonable insurance, maintenance, gasoline and parking expenses incurred in furtherance of the Company's business only through December 31, 2000. After the one-year period following the Effective Time, the following provisions will apply: 1. SAVINGS AND RETIREMENT PLANS. Executive shall be entitled to participate in all savings and retirement plans, practices, policies and programs to the extent applicable generally to other peer executives of International Paper. 2. WELFARE BENEFIT PLANS. Executive shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by International Paper (including, without limitation, medical, dental, disability, 5 group life insurance, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of International Paper. 3. RABBI TRUST. The Company shall continue to maintain the rabbi trust established for the benefit of Executive in accordance with its terms. 4. FRINGE BENEFITS; VACATION. Executive shall be entitled to fringe benefits and paid vacation in accordance with the plans, practices, programs and policies as in effect generally with respect to other peer executives of International Paper, PROVIDED HOWEVER, Executive shall be entitled to five weeks of vacation per year. 5. International Paper and the Company reserve the right to modify, suspend or discontinue any and all of the above plans, practices, policies and programs at any time without recourse by Executive so long as such action is taken generally with respect to other similarly situated peer executives and does not single out Executive. V. TERMINATION. A. DEATH. Executive's employment shall terminate automatically upon Executive's death. B. DISABILITY. If the Company determines in good faith that Executive has become disabled (physically or mentally), it may give to Executive written notice in accordance with Section XV of this Agreement of its intention to terminate Executive's employment. In such event, Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by Executive, provided that, within the 30 days after such receipt, Executive shall not have returned to full-time performance of his duties. For purposes of this Agreement, disability shall mean a physical or mental impairment that renders Executive unable to perform the essential functions of his position. The Company reserves the right, in good faith, 6 to make the determination of disability under this Agreement based upon information supplied by Executive and/or his medical personnel, as well as information from medical personnel (or others) selected by the Company or its insurers. C. CAUSE OR GOOD REASON. 1. The Company may terminate Executive's employment for Cause. For purposes of this Agreement, "Cause" shall mean that the Company, acting in good faith based upon the information then known to the Company, determines that Executive has engaged in or committed: willful misconduct; gross negligence; theft, fraud or other illegal conduct; refusal or unwillingness to perform his duties or performance of his duties in an unsatisfactory manner; sexual harassment; conduct which reflects adversely upon, or making any remarks disparaging of, the Company or International Paper, their Boards, officers, directors, advisors or employees or their affiliates or subsidiaries; insubordination; any willful act that is likely to and which does in fact have the effect of injuring the reputation, business or a business relationship of the Company or International Paper; violation of any fiduciary duty; violation of any duty of loyalty; and breach of any term of this Agreement. 2. Executive may terminate his employment for Good Reason. For purposes of this Agreement, "Good Reason" shall mean a material breach of this Agreement by the Company or International Paper. D. OTHER THAN CAUSE OR DEATH OR DISABILITY. The Company may terminate Executive's employment at any time, with or without Cause, by written notice to Executive, effective upon Executive's receipt of such notice. 7 E. OBLIGATIONS OF THE COMPANY UPON TERMINATION. 1. DEATH OR DISABILITY. If Executive's employment is terminated by reason of Executive's death or Disability, this Agreement shall terminate without further obligations to Executive or his legal representatives under this Agreement, other than for (a) payment of the sum of (i) Executive's annual base salary through the date of termination to the extent not theretofore paid, (ii) any performance bonus under the Bonus Plan for the calendar year ending prior to Executive's death or Disability to the extent not theretofore paid, (iii) any prorated bonus payable under the Bonus Plan pursuant to Section IV-B and (iv) and any accrued vacation pay to the extent not theretofore paid (the sum of the amounts described in clauses (i), (ii), (iii) and (iv) shall be hereinafter referred to as the "Accrued Obligations"), which shall be paid to Executive or his estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the date of termination. 2. CAUSE. If the Company terminates Executive's employment for Cause, this Agreement shall terminate without further obligations to Executive other than for the timely payment of Accrued Obligations. If it is subsequently determined that the Company did not have Cause for termination under Section V-C, then the Company's decision to terminate shall be deemed to have been made under Section V-D and the amounts payable under Section V-E3 shall be the only amounts Executive may receive for his termination. 3. OTHER THAN CAUSE OR DEATH OR DISABILITY; GOOD REASON. If the Company terminates Executive's employment for other than Cause or death or Disability during the Term of this Agreement, or if Executive terminates his employment with the Company 8 with Good Reason, this Agreement shall terminate without further obligations by the Company or International Paper to Executive other than (a) the timely payment of Accrued Obligations, and (b), subject to Executive's signing a release in the standard form then in use by the Company or International Paper for other peer executives, severance pay (payable in regular installments in accordance with the Company's normal payroll practices) constituting Executive's base salary for the lesser of one year or the remaining Term of this Agreement. 4. EXPIRATION OF AGREEMENT. If this Agreement expires at the end of the Term and Executive ceases to be employed by the Company at that time, Executive will receive timely payment of the Accrued Obligations. 5. EXCLUSIVE REMEDY. Executive agrees that the payments contemplated by this Agreement shall constitute the exclusive and sole remedy for any termination of his employment and Executive covenants not to assert or pursue any other remedies, at law or in equity, with respect to any termination of employment. Notwithstanding the preceding sentence, neither the severance pay described in Section V-E3 nor any other payment under this Section V-E shall reduce or affect any benefits the Executive (or his estate or beneficiary) may be entitled to under the specific terms of the benefit plans of the Company or any stock option or restricted stock award. VI. COVENANTS OF EXECUTIVE A. GENERAL: Executive and the Company understand and agree that the purpose of the provisions of this Section VI is to protect the legitimate business interests of the Company and International Paper, as more fully described below. Executive hereby acknowledges that the restrictions set forth in this Section VI are reasonable and necessary to protect the business 9 interests of the Company and/or International Paper. Therefore, Executive shall be subject to the restrictions set forth in this Section. B. RESTRICTIONS ON DISCLOSURE AND USE OF CONFIDENTIAL INFORMATION: Executive understands and agrees that confidential information and materials of a confidential or proprietary nature constitute valuable assets of the Company and International Paper and may not be converted to Executive's own use. Accordingly, Executive hereby agrees that he shall not, directly or indirectly, at any time during the Term and at any time following the Term, reveal, divulge or disclose any "Confidential Information" (as defined below), and Executive shall not, directly or indirectly, use or make use of any "Confidential Information" in connection with any business activity other than that of the Company and/or International Paper; PROVIDED, HOWEVER, that Executive may disclose or use "Confidential Information" during the Term as authorized by the IP Officer or consistent with the proper exercise of Executive's duties as President of the Company. "Confidential Information" means all information regarding the Company and/or International Paper, its and their activities, business, clients, or potential clients that is the subject of reasonable efforts by the Company and/or International Paper to maintain its confidentiality and that is not generally disclosed to persons not employed by the Company and/or International Paper. "Confidential Information" shall include, but is not limited to, any of the following information or materials of the Company and/or International Paper: financial plans and data; management planning information; business plans; operational methods; market studies; marketing plans or strategies; product development techniques or plans; customer lists; details of customer contracts; current and anticipated customer requirements; past, current and planned research and development; business acquisition plans; and new personnel acquisition 10 plans. "Confidential Information" shall not include information that has become generally available to the public. C. NONSOLICITATION. Executive understands and agrees that the relationship between the Company and/or International Paper and their respective employees, business relations, clients and customers, and potential clients and customers, constitutes a valuable asset of the Company and/or International Paper and may not be converted to Executive's own use. Accordingly, Executive agrees that, during the Term of this Agreement, and for a period of two (2) years from the termination for any reason pursuant to Section V of this Agreement other than the Company's termination of Executive without Cause or Executive's termination of his employment with Good Reason (the "Restricted Period"), neither Executive nor any entity with whom he is at the time affiliated (any other person, corporation, partnership or other business entity of any kind) shall, directly or indirectly, solicit or entice away or in any manner persuade or attempt to persuade, any officer, employee, agent, representative, business relation, client or customer, or prospective client or customer of the Company and/or International Paper, to discontinue his/her/its relationship or prospective relationship with the Company and/or International Paper. D. RESTRICTIVE COVENANT. Executive acknowledges that his services are special, unique, and extraordinary, and that in the course of his employment with the Company and/or International Paper he has had and will continue to have dealings and develop special relationships with the clients and customers of the Company and/or International Paper. Executive further acknowledges that in the course of his employment with or service to the Company and/or International Paper, he has obtained and will continue to obtain Confidential Information. In order to protect the legitimate business interests, goodwill, relationships, and 11 Confidential Information of the Company and/or International Paper, Executive agrees that during the Restricted Period defined above in Section VI-C, Executive shall not (whether for his own account or on behalf of any person, corporation, partnership, or other business entity of any kind, and whether directly or indirectly), without the prior written consent of the IP Officer, engage in the business of printing or manufacturing paperboard packaging anywhere in North America. Notwithstanding the foregoing, if Executive's employment with the Company terminates on or after the expiration of this Agreement at the end of its Term, Executive shall be subject to the same non-competition policy of International Paper that is applicable to other peer executives of International Paper. E. ENFORCEMENT OF COVENANTS. In the event Executive breaches, or threatens to commit a breach of, any of the provisions of this Section VI, the Company and/or International Paper shall have the following rights and remedies, which shall be independent of any others and severally enforceable, and shall be in addition to, and not in lieu of, any other rights and remedies available to the Company and/or International Paper at law or in equity: 1. the right to enjoin, preliminarily and permanently, Executive from violating or threatening to violate the terms of this Section VI and to have the promises made herein specifically enforced by any court of competent jurisdiction; and 2. the right and remedy to require Executive to account for and pay over to the Company and/or International Paper all compensation, profits, monies, accruals, increments or other benefits derived or received by Executive as a result of the transactions constituting a breach of this Section VI. 12 VII. ARBITRATION. Any and all controversies, claims or disputes arising out of or in any way relating to this Agreement, its enforcement or interpretation, or because of an alleged breach, default, or misrepresentation in connection with any of its provisions, or any other claim by Executive arising out of or in connection with his employment, including any claims for discrimination prohibited by any federal, state or other statute, ordinance or law, shall be settled by arbitration in accordance with the National Rules for Resolution of Employment Disputes of the American Arbitration Association (the "AAA"). The arbitration shall be commenced by filing a demand for arbitration with the AAA within sixty (60) days after the occurrence of the facts giving rise to any such controversy, claim or dispute. The arbitration shall be conducted in Purchase, New York. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. All costs and expenses of any arbitration proceeding shall be borne by the respective party incurring such costs and expenses. VIII. ASSIGNMENT. Executive acknowledges that his services are unique and personal. Accordingly, Executive may not assign his rights or delegate his duties under this Agreement to any person or entity. IX. SUCCESSORSHIP. This Agreement is binding on and inures to the benefit of the Company and/or International Paper, its successors and assigns. 13 X. MODIFICATION. This Agreement may not be amended or modified other than by a written agreement executed by Executive and the Company or its designee. XI. SAVINGS CLAUSE. If any provision of this Agreement or the application thereof is held invalid, the invalidity shall not affect other provisions or applications of the Agreement which can be given effect without the invalid provisions or applications and to this end the provisions of this Agreement are declared to be severable. XII. COMPLETE AGREEMENT. This Agreement hereby incorporates by reference the letter agreement entered into between Executive and International Paper on February 16, 2000 (the "Letter Agreement"). This Agreement, together with the Letter Agreement, constitutes and contains the entire agreement and final understanding concerning Executive's employment with the Company and the other subject matters addressed herein between the parties. The parties intend it as a complete and exclusive statement of the terms of their agreement. It supersedes and replaces all prior negotiations and all agreements proposed or otherwise, whether written or oral, concerning the subject matter hereof. Any representation, promise or agreement not specifically included in this Agreement shall not be binding upon or enforceable against either party. This is a fully integrated agreement. 14 XIII. GOVERNING LAW. The provisions of this Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York without regard to principles of conflict of laws. XIV. PARAGRAPH HEADINGS. Paragraph and other headings contained in this Agreement are for the convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. XV. NOTICES. Any notices to be given under this Agreement by one party to the other may be effected by personal delivery in writing or by mail, registered or certified, postage prepaid with return receipt requested. Mailed notice shall be deemed receive as of three (3) days after mailing. Notices by mail shall be sent to the address listed below unless and until notice to a change is given pursuant to this Section: To Executive: Mr. Howard M. Liebman 1302 Azure Place Hewlett Harbor, New York 11557 To the Company: Shorewood Packaging Corporation c/o International Paper Company Two Manhattanville Road Purchase, New York 10577 Attn: William Slowikowski 15 XVI. WITHHOLDING. All amounts payable to Executive under this Agreement shall be reduced by any applicable income and employment withholding taxes and other authorized deductions. XVII . SURVIVORSHIP. The respective rights and obligations of the parties hereunder shall survive any termination of Executive's employment to the extent necessary to the intended preservation of such rights and obligations. XVIII. COUNTERPARTS. This Agreement may be executed in two or more counterparts, each of which will take effect as an original, and all of which shall evidence one and the same Agreement. XIX. REPRESENTATION. The Company, International Paper and Executive represent that they are knowledgeable and sophisticated as to business matters, including the subject matter of this Agreement, that they have read this Agreement and that they understand its terms. The Company, International Paper and Executive acknowledge that, prior to assenting to the terms of this Agreement, they have been given a reasonable amount of time to review it and to negotiate at arm's length as to its contents. The Company, International Paper and Executive agree that the language used in this Agreement is the language chosen by the parties to express their mutual intent, and that they have entered into this Agreement freely and voluntarily and without pressure or coercion from anyone. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. SHOREWOOD PACKAGING CORPORATION By: ________________________________ Title:____________________________ INTERNATIONAL PAPER COMPANY By: ________________________________ Title:____________________________ HOWARD M. LIEBMAN ______________________________________ 16
EXHIBIT B OUTSTANDING DATE OF LOAN PRINCIPAL AMOUNT RATE OF INTEREST DUE DATE ------------ ---------------- ---------------- -------- April 1998 $605,000 6.5% August 1, 2013 June 23, 1999 $341,145 6.5% October 2, 2000 July 26, 1999 $316,376 6.5% October 2, 2000
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