0000950134-01-506861.txt : 20011009 0000950134-01-506861.hdr.sgml : 20011009 ACCESSION NUMBER: 0000950134-01-506861 CONFORMED SUBMISSION TYPE: SC TO-T PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 20010928 GROUP MEMBERS: TEMPLE-INLAND ACQUISITION CORPORATION SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: GAYLORD CONTAINER CORP /DE/ CENTRAL INDEX KEY: 0000812700 STANDARD INDUSTRIAL CLASSIFICATION: PAPERBOARD CONTAINERS & BOXES [2650] IRS NUMBER: 363472452 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: SC TO-T SEC ACT: 1934 Act SEC FILE NUMBER: 005-39843 FILM NUMBER: 1747668 BUSINESS ADDRESS: STREET 1: 500 LAKE COOK RD STE 400 CITY: DEERFIELD STATE: IL ZIP: 60015 BUSINESS PHONE: 7084055500 MAIL ADDRESS: STREET 1: 500 LAKE COOK ROADE STREET 2: SUITE 400 CITY: DEERFIELD STATE: IL ZIP: 60015 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: TEMPLE INLAND INC CENTRAL INDEX KEY: 0000731939 STANDARD INDUSTRIAL CLASSIFICATION: PAPERBOARD MILLS [2631] IRS NUMBER: 751903917 STATE OF INCORPORATION: DE FISCAL YEAR END: 1230 FILING VALUES: FORM TYPE: SC TO-T BUSINESS ADDRESS: STREET 1: 303 S TEMPLE DR STREET 2: P.O. DRAWER N CITY: DIBOLL STATE: TX ZIP: 75941 BUSINESS PHONE: 9368295511 MAIL ADDRESS: STREET 1: 303 SOUTH TEMPLE DR CITY: DIBOLL STATE: TX ZIP: 75941 SC TO-T 1 d90566scto-t.txt SCHEDULE TO-T 1 -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 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 AND SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 --------------------- GAYLORD CONTAINER CORPORATION (Name of Subject Company (Issuer)) TEMPLE-INLAND ACQUISITION CORPORATION AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF TEMPLE-INLAND INC. (Names of Filing Persons (Offerors)) CLASS A COMMON STOCK, PAR VALUE $.0001 PER SHARE (INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE PREFERRED STOCK) (Title of Class of Securities) 368145108 (CUSIP Number of Class of Securities) M. RICHARD WARNER, ESQ. TEMPLE-INLAND INC. 303 SOUTH TEMPLE DRIVE DIBOLL, TX 75941 (936) 829-5511 (Name, Address and Telephone Number of Person Authorized To Receive Notices and Communications on Behalf of the Filing Persons) Copy to: STEPHEN W. HAMILTON, ESQ. SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP 1440 NEW YORK AVENUE, N.W. WASHINGTON, D.C. 20005 (202) 371-7000 SEPTEMBER 27, 2001 (Date of event which requires filing statement on Schedule 13D) CALCULATION OF FILING FEE
TRANSACTION VALUATION* AMOUNT OF FILING FEE** ---------------------- ---------------------- $100,748,688 $20,150
--------------- * Estimated for purposes of calculating the amount of the filing fee only in accordance with Rules 0-11(d) under the Securities Exchange Act of 1934, as amended, based upon (a) $1.80 multiplied by (b) 55,971,493, representing the aggregate number of shares of Gaylord Container Corporation Class A common stock outstanding as of September 26, 2001 plus the maximum number of shares expected to be issued pursuant to outstanding options prior to the date the offer is expected to be consummated. ** The amount of the filing fee, calculated in accordance with Rule 0-11 under the Securities Exchange Act of 1934, as amended, equals one-fiftieth of one percent of the value of the transaction. Sent by wire transfer to the SEC's lockbox account on September 28, 2001. [ ] 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: None Filing Party: N/A Form or Registration No.: N/A Date Filed: N/A
[ ] 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: [ ] -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- 2 CUSIP NO. 368145108 13D -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Temple-Inland Acquisition Corporation -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF GROUP [ ] (a) [ ] (b) -------------------------------------------------------------------------------- 3 SEC USE ONLY -------------------------------------------------------------------------------- 4 SOURCES OF FUNDS AF -------------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER 0 SHARES --------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER 0 OWNED BY EACH --------------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER 0 PERSON WITH --------------------------------------------------- 10 SHARED DISPOSITIVE POWER 0 -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 0 -------------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0% -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO -------------------------------------------------------------------------------- 3 CUSIP NO. 368145108 13D -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Temple-Inland Inc. I.R.S. Identification No. 75-1903917 -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF GROUP [ ] (a) [ ] (b) -------------------------------------------------------------------------------- 3 SEC USE ONLY -------------------------------------------------------------------------------- 4 SOURCES OF FUNDS BK, WC -------------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) [ ] -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER 0 SHARES --------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER 6,672,480 OWNED BY EACH --------------------------------------------------- REPORTING 9 SOLE DISPOSITIVE POWER 0 PERSON WITH --------------------------------------------------- 10 SHARED DISPOSITIVE POWER 6,672,480 -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 6,672,480 -------------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ] -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 11.9% -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON CO -------------------------------------------------------------------------------- 4 This Tender Offer Statement on Schedule TO relates to the offer (the "Offer") by Temple-Inland Inc., a Delaware corporation (the "Parent"), through its indirect, wholly-owned subsidiary, Temple-Inland Acquisition Corporation, a Delaware corporation (the "Purchaser"), to purchase all outstanding shares of Class A Common Stock, par value $.0001 per share (the "Common Stock"), of Gaylord Container Corporation, a Delaware corporation (the "Company"), including the associated rights to purchase preferred stock issued pursuant to the Rights Agreement (as defined in the Offer to Purchase) (the "Rights" and, together with the Common Stock, the "Shares"), at a price of $1.80 per Share, net to the seller in cash, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated September 28, 2001 (the "Offer to Purchase"), a copy of which is attached hereto as Exhibit (a)(1), and in the related Letter of Transmittal (which, together with the Offer to Purchase, as either may be amended or supplemented from time to time, collectively constitute the "Offer Documents"), a copy of which is attached hereto as Exhibit (a)(2). The Offer is made pursuant to an Agreement and Plan of Merger, dated as of September 27, 2001, among the Parent, the Purchaser and the Company, which contemplates the merger of the Purchaser with and into the Company (the "Merger"). This Tender Offer Statement on Schedule TO also constitutes a Statement on Schedule 13D with respect to the acquisition by the Parent of beneficial ownership of Shares pursuant to the Stockholders Agreement, dated as of September 27, 2001 (the "Stockholders Agreement"), among the Parent, the Purchaser and certain stockholders of the Company (the "Tendering Stockholders"), pursuant to which the Tendering Stockholders agreed to tender an aggregate of 6,672,480 Shares owned by them (the "Committed Shares") pursuant to the Offer and granted to the Parent an irrevocable proxy to vote such Committed Shares in favor of the Merger. The Stockholders Agreement is described more fully in Section 11 of the Offer to Purchase. The cover page above and item numbers and responses thereto below are in accordance with the requirements of Schedule TO. All information in the Offer Documents, including all schedules and annexes, is hereby expressly incorporated by reference in answer to all items in this Schedule TO, except as otherwise set forth below. ITEM 1. SUMMARY TERM SHEET. The information set forth in the section of the Offer to Purchase filed as Exhibit (a)(1) captioned "Summary Term Sheet" is incorporated herein by reference. ITEM 2. SUBJECT COMPANY INFORMATION. (a) The name of the subject company is Gaylord Container Corporation, a Delaware corporation, and the address of its principal executive offices is 500 Lake Cook Road, Suite 400, Deerfield, Illinois 60015. Its telephone number is (847) 405-5500. (b) The subject class of equity securities is the Company's Class A Common Stock, par value $.0001 per share, including the associated rights to purchase preferred stock issued pursuant to the Rights Agreement. The information set forth in the section of the Offer to 1 5 Purchase captioned "Introduction" is incorporated herein by reference. As of September 26, 2001, 55,971,493 Shares were outstanding. (c) The information concerning the principal market in which the Shares are traded and certain high and low closing sales prices for the Shares in such principal market is set forth in section 6 ("Price Range of Shares; Dividends") of the Offer to Purchase and is incorporated herein by reference. ITEM 3. IDENTITY AND BACKGROUND OF FILING PERSON. (a), (b) This Schedule TO is being filed by the Parent and the Purchaser. The information set forth in section 8 ("Certain Information Concerning Parent and the Purchaser") and the section captioned "Schedule I: Directors and Executive Officers of Parent and the Purchaser" of the Offer to Purchase is incorporated herein by reference. (c)(1), (2) and (5) The information set forth in the section of the Offer to Purchase captioned "Schedule I: Directors and Executive Officers of Parent and the Purchaser" is incorporated herein by reference. (c)(3), (4) During the last five years, none of the Parent, the Purchaser or, to the best of their knowledge, any of the persons listed on Schedule I to the Offer to Purchase incorporated herein by reference (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 federal or state securities laws. ITEM 4. TERMS OF THE TRANSACTION. (a)(1)(i)-(viii), (xii) The information set forth in the section of the Offer to Purchase captioned "Introduction," and in section 1 ("Terms of the Offer"), section 2 ("Acceptance for Payment and Payment for Shares"), section 3 ("Procedures for Tendering Shares"), section 4 ("Withdrawal Rights"), section 5 ("Certain United States Federal Income Tax Considerations"), section 9 ("Source and Amount of Funds or other Consideration"), section 10 ("Background of the Offer; Past Contacts or Negotiations with the Company"), section 11 ("The Merger Agreement; Other Arrangements"), section 12 ("Purpose of the Offer; Plans for the Company"), and section 13 ("Certain Effects of the Offer") of the Offer to Purchase is incorporated herein by reference. (a)(1)(ix), (x), (xi) Not applicable. (a)(2)(i)-(iv), (vii) The information set forth in the section of the Offer to Purchase captioned "Introduction," and in section 1 ("Terms of the Offer"), section 2 ("Acceptance for Payment and Payment for Shares"), section 3 ("Procedures for Tendering Shares"), section 4 2 6 ("Withdrawal Rights"), section 5 ("Certain United States Federal Income Tax Considerations"), section 9 ("Source and Amount of Funds or other Consideration"), section 10 ("Background of the Offer; Past Contacts or Negotiations with the Company"), section 11 ("The Merger Agreement; Other Arrangements"), section 12 ("Purpose of the Offer; Plans for the Company"), section 13 ("Certain Effects of the Offer"), section 15 ("Certain Conditions of the Offer"), section 16 ("Certain Legal Matters; Regulatory Approvals"), and section 17 ("Appraisal Rights") of the Offer to Purchase is incorporated herein by reference. (a)(2)(v) and (vi) Not applicable. ITEM 5. PAST CONTACTS, TRANSACTIONS, NEGOTIATIONS AND AGREEMENTS. (a) None. (b) The information set forth in the section of the Offer to Purchase captioned "Introduction," and in section 8 ("Certain Information Concerning Parent and the Purchaser"), section 10 ("Background of the Offer; Past Contacts or Negotiations with the Company"), and section 11 ("The Merger Agreement; Other Arrangements") of the Offer to Purchase and in Exhibits (d)(1), (d)(2) and (d)(3) attached hereto is incorporated herein by reference. ITEM 6. PURPOSES OF THE TRANSACTION AND PLANS OR PROPOSALS. (a), (c)(1-7) The information set forth in the section of the Offer to Purchase captioned "Introduction," and in section 1 ("Terms of the Offer"), section 10 ("Background of the Offer; Past Contacts or Negotiations with the Company"), section 11 ("The Merger Agreement; Other Arrangements"), section 12 ("Purpose of the Offer; 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. ITEM 7. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a), (b), (d) The information set forth in the Offer to Purchase in section 9 ("Source and Amount of Funds or Other Consideration") is incorporated herein by reference. ITEM 8. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a), (b) The information set forth in the Offer to Purchase in section 8 ("Certain Information Concerning Parent and the Purchaser"), section 11 ("The Merger Agreement; Other Arrangements") and in the section captioned "Schedule I: Directors and Executive Officers of Parent and the Purchaser" is in incorporated herein by reference. 3 7 ITEM 9. PERSONS/ASSETS, RETAINED, EMPLOYED, COMPENSATED OR USED. (a) The information set forth in the Offer to Purchase in section 18 ("Fees and Expenses") is incorporated herein by reference. ITEM 10. FINANCIAL STATEMENTS. Not applicable. ITEM 11. ADDITIONAL INFORMATION. (a)(1) Not applicable. (a)(2-4) The information set forth in the Offer to Purchase in section 11 ("The Merger Agreement; Other Arrangements"), section 13 ("Certain Effects of the Offer"), section 15 ("Certain Conditions of the Offer") and section 16 ("Certain Legal Matters; Regulatory Approvals") is incorporated herein by reference. (a)(5) None. (b) None. ITEM 12. EXHIBITS. (a)(1) Offer to Purchase, dated September 28, 2001 (a)(2) Form of Letter of Transmittal (a)(3) Form of Notice of Guaranteed Delivery (a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (a)(5) Form of Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (a)(7) Joint Press Release issued by the Parent and the Company on September 27, 2001 (a)(8) Form of Summary Advertisement as published in the Wall Street Journal on September 28, 2001 (b)(1) Commitment Letter, dated September 26, 2001, among the Parent, Salomon Smith Barney Inc. and Citibank, N.A. (d)(1) Agreement and Plan of Merger, dated as of September 27, 2001, among the Parent, the Purchaser and the Company (d)(2) Stockholders Agreement, dated as of September 27, 2001, among the Parent, the Purchaser and certain stockholders of the Company (d)(3) Stock Option Agreement, dated as of September 27, 2001, between the Parent and the Company 4 8 (d)(4) Confidentiality Agreement, dated January 19, 2000, between Parent and the Company (g) [None] (h) [None] ITEM 13. INFORMATION REQUIRED BY SCHEDULE 13E-3. Not applicable. 5 9 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. TEMPLE-INLAND INC. By: /s/ M. RICHARD WARNER ----------------------------------- Name: M. Richard Warner Title: Vice President and Chief Administrative Officer TEMPLE-INLAND ACQUISITION CORPORATION By: /s/ M. RICHARD WARNER ----------------------------------- Name: M. Richard Warner Title: Vice President Date: September 28, 2001 10 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION ------- ----------- (a)(1) Offer to Purchase, dated September 28, 2001 (a)(2) Form of Letter of Transmittal (a)(3) Form of Notice of Guaranteed Delivery (a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (a)(5) Form of Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 (a)(7) Joint Press Release issued by the Parent and the Company on September 27, 2001 (a)(8) Form of Summary Advertisement as published in the Wall Street Journal on September 28, 2001 (b)(1) Commitment Letter, dated September 26, 2001, among the Parent, Salomon Smith Barney Inc. and Citibank, N.A. (d)(1) Agreement and Plan of Merger, dated as of September 27, 2001, among the Parent, the Purchaser and the Company (d)(2) Stockholders Agreement, dated as of September 27, 2001, among the Parent, the Purchaser and certain stockholders of the Company (d)(3) Stock Option Agreement, dated as of September 27, 2001, between the Parent and the Company (d)(4) Confidentiality Agreement, dated January 19, 2000, between Parent and the Company (g) [None] (h) [None]
EX-99.(A)(1) 3 d90566ex99-a1.txt OFFER TO PURCHASE, DATED SEPTEMBER 28, 2001 1 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE PREFERRED STOCK) OF GAYLORD CONTAINER CORPORATION FOR $1.80 NET PER SHARE BY TEMPLE-INLAND ACQUISITION CORPORATION AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF TEMPLE-INLAND INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, OCTOBER 26, 2001, UNLESS THE OFFER IS EXTENDED. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED HEREIN) A NUMBER OF SHARES OF CLASS A COMMON STOCK, PAR VALUE $.0001 PER SHARE, OF GAYLORD CONTAINER CORPORATION (THE "COMPANY"), INCLUDING THE ASSOCIATED RIGHTS (THE "RIGHTS") TO PURCHASE PREFERRED STOCK (COLLECTIVELY, THE "SHARES"), THAT, TOGETHER WITH THE SHARES THEN OWNED BY TEMPLE-INLAND INC. ("PARENT") AND TEMPLE-INLAND ACQUISITION CORPORATION ("THE PURCHASER"), REPRESENTS AT LEAST TWO-THIRDS OF THE THEN OUTSTANDING SHARES ON A FULLY DILUTED BASIS (AS DEFINED HEREIN), (II) THE RECEIPT BY THE DEPOSITARY (AS DEFINED HEREIN) OF THE VALID AND UNWITHDRAWN TENDER OF THE COMPANY'S 9 3/8% SENIOR NOTES DUE 2007, 9 3/4% SENIOR NOTES DUE 2007 AND 9 7/8% SENIOR SUBORDINATED NOTES DUE 2008 (COLLECTIVELY, THE "NOTES") (AND RELATED CONSENTS) OF EACH SERIES REPRESENTING AT LEAST 90% IN AGGREGATE PRINCIPAL AMOUNT OF THE OUTSTANDING NOTES OF SUCH SERIES, PURSUANT TO PARENT'S, OR ITS DESIGNEE'S, SEPARATE OFFERS TO PURCHASE SUCH NOTES, AND (III) THE WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER, HAVING EXPIRED OR BEEN TERMINATED. THE OFFER IS ALSO SUBJECT TO OTHER CONDITIONS. SEE SECTION 15. THE OFFER IS BEING MADE IN CONNECTION WITH THE AGREEMENT AND PLAN OF MERGER, DATED AS OF SEPTEMBER 27, 2001 (THE "MERGER AGREEMENT"), AMONG PARENT, THE PURCHASER AND THE COMPANY. THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY (I) DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER DESCRIBED HEREIN ARE FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY, (II) APPROVED THE OFFER, THE MERGER AND THE MERGER AGREEMENT AND (III) RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER, TENDER THEIR SHARES PURSUANT TO THE OFFER AND APPROVE AND ADOPT THE MERGER AGREEMENT AND THE MERGER. IMPORTANT Any stockholder of the Company wishing to tender Shares in the Offer must (1) complete and sign the Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal and mail or deliver the Letter of Transmittal and all other required documents to the Depositary (as defined herein) together with certificates representing the Shares tendered or follow the procedure for book-entry transfer as set forth in Section 3 herein or (2) request such stockholder's broker, dealer, commercial bank, trust company or other nominee to effect the transaction for the stockholder. A stockholder whose Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such person if such stockholder wishes to tender such Shares. Rights are presently evidenced by the certificates for the Shares of 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. Any stockholder of the Company who wishes to tender Shares and cannot deliver certificates representing such Shares and all other required documents to the Depositary on or prior to the Expiration Date or who cannot comply with the procedures for book-entry transfer on a timely basis may tender such Shares pursuant to the guaranteed delivery procedure set forth in Section 3. Questions and requests for assistance may be directed to the Information Agent or the Depositary at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and other related materials may be obtained from the Information Agent or the Dealer Manager. Stockholders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance. The Dealer Manager for the Offer is: SALOMON SMITH BARNEY September 28, 2001 2 TABLE OF CONTENTS
PAGE ---- SUMMARY TERM SHEET.......................................... 1 INTRODUCTION................................................ 5 THE TENDER OFFER............................................ 7 1. Terms of the Offer.................................... 7 2. Acceptance for Payment and Payment for Shares......... 9 3. Procedures for Tendering Shares....................... 9 4. Withdrawal Rights..................................... 12 5. Certain United States Federal Income Tax Considerations......................................... 13 6. Price Range of Shares; Dividends...................... 14 7. Certain Information Concerning the Company............ 15 8. Certain Information Concerning Parent and the Purchaser.............................................. 15 9. Source and Amount of Funds or Other Consideration..... 16 10. Background of the Offer; Past Contacts or Negotiations with the Company....................................... 17 11. The Merger Agreement; Other Arrangements.............. 21 12. Purpose of the Offer; Plans for the Company........... 31 13. Certain Effects of the Offer.......................... 33 14. Dividends and Distributions........................... 38 15. Certain Conditions of the Offer....................... 38 16. Certain Legal Matters; Regulatory Approvals........... 40 17. Appraisal Rights...................................... 41 18. Fees and Expenses..................................... 41 19. Miscellaneous......................................... 42 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER................................................. 43
ii 3 SUMMARY TERM SHEET Temple-Inland Acquisition Corporation is offering to purchase all of the outstanding common stock of Gaylord Container Corporation for $1.80 in cash. The following are some of the questions you, as a stockholder of Gaylord, may have and answers to those questions. We urge you to read carefully the remainder of this Offer to Purchase and the accompanying Letter of Transmittal in their entirety 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 accompanying Letter of Transmittal. WHO IS OFFERING TO BUY MY SECURITIES? Our name is Temple-Inland Acquisition Corporation. We are a Delaware corporation formed for the purpose of making a tender offer for all of the shares of common stock of Gaylord and have carried on no other business other than in connection with the merger agreement among Temple-Inland Inc., Gaylord and ourselves. We are an indirect, wholly-owned subsidiary of Temple-Inland Inc., a Delaware corporation whose shares of common stock are listed on the New York Stock Exchange and the Pacific Exchange. Temple-Inland is a holding company that conducts all of its operations through its subsidiaries. The business of Temple-Inland is divided among three groups: paper, which manufactures corrugated packaging products; building products, which manufactures a wide range of building products and manages Temple-Inland's forest resources of approximately 2.2 million acres of timberland in Texas, Louisiana, Georgia, and Alabama; and financial services, which consists of savings bank, mortgage banking, real estate, and insurance brokerage activities. See the "Introduction" and Section 8. WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER? We are seeking to purchase all of the issued and outstanding shares of Class A common stock of Gaylord, which constitutes all of its outstanding common stock, and the rights to purchase preferred stock associated with those shares. See the "Introduction" and Section 1. HOW MUCH ARE YOU OFFERING TO PAY FOR MY SHARES? WHAT IS THE FORM OF PAYMENT? WILL I HAVE TO PAY ANY FEES OR COMMISSIONS? We are offering to pay $1.80 per share, net to you in cash, without interest. 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. However, 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? Temple-Inland Inc., our parent company, will provide us with sufficient funds to purchase all shares validly tendered and not withdrawn in the tender offer and to provide funding for the merger, which is expected to follow the successful completion of the tender offer in accordance with the terms and conditions of the merger agreement. The Offer is not conditioned on our obtaining any financing. Temple-Inland Inc. will obtain its funds pursuant to a term credit facility from Citibank, N.A. and Salomon Smith Barney Inc. See Section 9 for a description of our financing arrangements. IS YOUR FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER MY SHARES IN THE TENDER OFFER? We do not think our financial condition is relevant to your decision whether to tender your shares in the offer because the form of payment consists solely of cash, and our offer is not contingent upon our receipt of financing. See Section 9 for a description of our financing arrangements. 1 4 HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER MY SHARES IN THE OFFER? You will have until 12:00 midnight, New York City time, on Friday, October 26, 2001, to tender your shares in the offer, unless the offer is extended. 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 3. CAN THE OFFER BE EXTENDED AND UNDER WHAT CIRCUMSTANCES? Subject to the terms of the merger agreement and applicable law, we can extend the offer at any time and from time to time in our sole discretion. We have agreed in the merger agreement that we may extend and re-extend the offer without Gaylord's consent if any of the conditions to the offer have not been satisfied or waived at the scheduled expiration date. However, without Gaylord's consent we may not extend the offer beyond December 28, 2001 unless required to so extend the offer pursuant to regulations of the Securities and Exchange Commission. In addition, after we have purchased shares tendered in the offer, we may elect to provide a "subsequent offering period" if less than 90% of the shares outstanding on a fully-diluted basis were properly tendered and not withdrawn. A subsequent offering period, if one is provided, will be an additional period of from 3 to 20 business days, beginning after we have purchased shares tendered during the offer, during which stockholders may tender, but not withdraw, their shares and receive the offer consideration for those shares promptly after they are tendered. See Section 1 for more details on our ability to extend the offer. HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED? If we extend the offer, we will inform Computershare Trust Company of New York (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 previously scheduled to expire. See Section 1. WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER? We are not obligated to purchase any shares that are validly tendered unless: - the number of shares validly tendered and not withdrawn before the expiration date of the offer, together with the shares then owned by Temple-Inland and Temple-Inland Acquisition Corporation, represents at least two-thirds of the then outstanding shares on a fully diluted basis (this condition is called the "minimum stock condition" and cannot be waived by us); - the depositary receives the valid and unwithdrawn tender of at least 90% in aggregate principal amount of each series of the Company's outstanding 9 3/8% Senior Notes due 2007, 9 3/4% Senior Notes due 2007 and 9 7/8% Senior Subordinated Notes due 2008, pursuant to Temple-Inland's separate offers to purchase such notes; - there is no material adverse change in Gaylord or its business; and - the expiration or termination of the applicable waiting period under applicable antitrust laws has occurred. The offer is also subject to a number of other conditions. We can waive any of the conditions to the offer without Gaylord's consent, except the minimum stock condition. 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 Computershare Trust Company of New York, the depositary for the offer, not later than the time the 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 are unable to deliver any required document or 2 5 instrument to the depositary by the expiration of the tender offer, you may gain some extra time by having a broker, a bank or other fiduciary that 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 3. UNTIL WHAT TIME MAY I WITHDRAW PREVIOUSLY TENDERED SHARES? You may withdraw shares at any time until the offer has expired and, if we have not agreed to accept your shares for payment by Monday, November 26, 2001, you may withdraw them at any time after that date until we accept shares for payment. This right to withdraw, however, will not apply to the subsequent offering period discussed in Section 1. See Section 4. 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 4. DOES THE GAYLORD BOARD OF DIRECTORS RECOMMEND THE OFFER? We are making the offer pursuant to the merger agreement, which has been unanimously approved by the Gaylord board of directors. The board of directors of Gaylord unanimously (1) determined that the terms of the offer and the merger are fair to and in the best interests of the stockholders of Gaylord, (2) approved the offer, the merger and the merger agreement and (3) recommends that Gaylord's stockholders accept the tender offer, tender their shares pursuant to the tender offer and approve and adopt the merger agreement and the merger. See the "Introduction." IF TWO-THIRDS OF THE SHARES ARE TENDERED AND ACCEPTED FOR PAYMENT, WILL GAYLORD CONTINUE AS A PUBLIC COMPANY? No. Following the purchase of shares in the offer we expect to consummate the merger. If the merger takes place, Gaylord will no longer be publicly owned. Even if for some reason the merger does not take place, after we purchase all of the tendered shares, there may be so few remaining stockholders and publicly held shares that Gaylord common stock will no longer be eligible to be traded on the American Stock Exchange, there may not be a public trading market for Gaylord stock and Gaylord may cease making filings with the Securities and Exchange Commission or otherwise cease being required to comply with the SEC rules relating to publicly held companies. See Section 13. WILL THE TENDER OFFER BE FOLLOWED BY A MERGER IF ALL OF THE GAYLORD SHARES ARE NOT PURCHASED IN THE OFFER? Yes. If we accept for payment and pay for at least two-thirds of the outstanding shares of Gaylord, Temple-Inland Acquisition Corporation will be merged with and into Gaylord. If that merger takes place, Temple-Inland will indirectly own all of the issued and outstanding shares of Gaylord, and all remaining stockholders of Gaylord (other than Temple-Inland, its subsidiaries and stockholders properly exercising dissenters' rights) will receive $1.80 per share in cash (or any other higher price per share that is paid in the offer). See the "Introduction." 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 dissenters' rights 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 if you tender your shares and you will have waived your dissenters' rights under Delaware law. If the merger does not take place, however, the number of stockholders and the number of 3 6 shares of Gaylord that 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 the Gaylord common stock. Also, as described above, Gaylord 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 September 27, 2001, the last trading day before we announced and commenced the offer and the possible merger, the last sale price of Gaylord common stock reported on the American Stock Exchange was $0.69 per share. We advise you to obtain a recent quotation for shares of Gaylord common stock in deciding whether to tender your shares. See Section 6. WHAT ARE THE PRINCIPAL TAX CONSEQUENCES OF TENDERING MY SHARES? The receipt of cash for shares pursuant to the offer or the merger will be a taxable transaction for United States federal income tax purposes and possibly for state, local and foreign income tax purposes as well. In general, a stockholder who tenders shares pursuant to the offer or receives cash in exchange for shares pursuant to the merger will recognize gain or loss for United States federal income tax purposes equal to the difference, if any, between the amount of cash received and the stockholder's adjusted tax basis in the shares sold pursuant to the offer or exchanged for cash pursuant to the merger. If the shares exchanged constitute capital assets in the hands of the stockholder, such gain or loss will be capital gain or loss. In general, capital gains recognized by an individual will be subject to a maximum United States federal income tax rate of 20% if the shares were held for more than one year, and if held for one year or less they will be subject to tax at ordinary income tax rates. See Section 5. TO WHOM MAY I SPEAK IF I HAVE QUESTIONS ABOUT THE TENDER OFFER? You may call our information agent D. F. King & Co., Inc. at (800) 549-6650 (toll-free). See the back cover of this Offer to Purchase. 4 7 To the Holders of Shares of Common Stock of Gaylord Container Corporation: INTRODUCTION Temple-Inland Acquisition Corporation, a Delaware corporation (the "Purchaser") and an indirect, wholly-owned subsidiary of Temple-Inland Inc., a Delaware corporation ("Parent"), hereby offers to purchase all outstanding shares of Class A Common Stock, par value $.0001 per share (the "Common Stock"), of Gaylord Container Corporation, a Delaware corporation (the "Company"), together with the associated rights to purchase preferred stock issued pursuant to the Rights Agreement, dated June 12, 1995 (the "Rights Agreement"), between the Company and Harris Trust and Savings Bank, as rights agent (the "Rights" and, together with the Common Stock, the "Shares") at a price of $1.80 per Share, net to the seller in cash, without interest thereon (the "Offer Price"), 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"). The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of September 27, 2001 (the "Merger Agreement") among Parent, the Purchaser and the Company. The Merger Agreement provides, among other things, that the Purchaser will be merged with and into the Company (the "Merger"). At the effective time of the Merger (the "Effective Time"), the Company will continue as the surviving corporation (the "Surviving Corporation"), indirectly wholly-owned by Parent. Pursuant to the Merger, each Share outstanding immediately prior to the Effective Time (other than Shares owned beneficially or of record by Parent or any subsidiary of Parent or held in the treasury of the Company, all of which will be canceled, and other than Shares that are held by stockholders, if any, who properly exercise their dissenters' rights under the Delaware General Corporation Law (the "DGCL")), shall be converted into the right to receive the per Share price paid in the Offer in cash, without interest (the "Merger Consideration"). The Merger Agreement is more fully described in Section 11, which also contains a discussion of the treatment of stock options. We are not asking for a proxy and you are requested not to send us a proxy. Any solicitation of proxies will be made only pursuant to separate proxy solicitation materials complying with the requirements of Section 14(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Tendering stockholders who are record owners of their Shares and tender directly to the Depositary (as defined below) will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes with respect to the purchase of Shares by the 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. Parent or the Purchaser will pay all charges and expenses of Computershare Trust Company of New York, as depositary (the "Depositary"), and D. F. King & Co., Inc., as information agent (the "Information Agent"), incurred in connection with the Offer. See Section 18. THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD") HAS UNANIMOUSLY (1) DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY, (2) APPROVED THE OFFER, THE MERGER AND THE MERGER AGREEMENT AND (3) RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER, TENDER THEIR SHARES PURSUANT TO THE OFFER AND APPROVE AND ADOPT THE MERGER AGREEMENT AND THE MERGER. Deutsche Banc Alex. Brown Inc. ("Deutsche Banc") and Rothschild Inc. ("Rothschild"), the Company's financial advisors, each has delivered to the Company Board its written opinion dated September 27, 2001, to the effect that, as of such date and based on and subject to the matters stated in such opinions, the per Share cash to be received in the Offer and the Merger by the holders of Shares is fair from a financial point of view to such holders (other than Parent and its affiliates). The full text of each written opinion, which describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken, is included as an annex to the Company's Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9") under the Exchange Act, which 5 8 is being mailed to stockholders concurrently herewith. Stockholders are urged to read carefully the full text of each opinion in its entirety. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY TENDERED IN ACCORDANCE WITH THE TERMS OF THE OFFER AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE THAT NUMBER OF SHARES THAT, TOGETHER WITH THE SHARES THEN OWNED BY PARENT AND THE PURCHASER, REPRESENTS AT LEAST TWO-THIRDS OF THE THEN OUTSTANDING SHARES ON A FULLY DILUTED BASIS (THE "MINIMUM STOCK CONDITION"), (2) THE RECEIPT BY THE DEPOSITARY OF THE VALID AND UNWITHDRAWN TENDER OF THE COMPANY'S 9 3/8% SENIOR NOTES DUE 2007, 9 3/4% SENIOR NOTES DUE 2007 AND 9 7/8% SENIOR SUBORDINATED NOTES DUE 2008 (COLLECTIVELY, THE "NOTES") (AND RELATED CONSENTS) REPRESENTING AT LEAST 90% IN AGGREGATE PRINCIPAL AMOUNT OF THE OUTSTANDING NOTES OF EACH SERIES (THE "MINIMUM NOTE CONDITION"), PURSUANT TO PARENT'S, OR ITS DESIGNEE'S, SEPARATE OFFERS TO PURCHASE SUCH NOTES (THE "NOTES TENDER OFFERS"), AND (3) THE WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER (THE "HSR ACT"), HAVING EXPIRED OR BEEN TERMINATED (THE "HSR CONDITION"). PLEASE READ SECTION 15, WHICH SETS FORTH IN FULL THE CONDITIONS TO THIS OFFER. 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 (other than the options to be cancelled pursuant to the Merger Agreement), warrants and other rights or securities convertible into shares of Common Stock, whether or not currently exercisable, except for the Rights and Shares issuable to Parent pursuant to the Stock Option Agreement between the Company and Parent, to the extent Parent has not exercised its option. Pursuant to the Merger Agreement, the Company has represented to Parent that, on September 26, 2001, (1) 55,971,493 Shares were issued and outstanding, (2) 1,854,403 Shares were subject to the exercise of stock options, (3) 827,135 Shares (which are included in the number outstanding in clause (1)) were subject to the exercise of warrants, and (4) 2,130,500 Shares (which are included in the number outstanding in clause (1)) were restricted shares of Common Stock. Neither Parent, the Purchaser nor any person listed on Schedule I hereto (except as set forth thereon) beneficially owns any Shares. Accordingly, the Purchaser believes that the Minimum Stock Condition would be satisfied if approximately 38,550,597 Shares were validly tendered and not withdrawn prior to the Expiration Date, though the number required to meet the Minimum Stock Condition will likely be lower due to the cancellation of certain stock options pursuant to Section 3.4(a) of the Merger Agreement. See Section 13. The Merger Agreement provides that promptly upon the purchase of and payment for Shares pursuant to the Offer, as a result of which Parent and its affiliates will own beneficially at least a majority of the then outstanding Shares, Parent shall be entitled to designate such number of directors, rounded up to the next whole number, on the Company Board that equals the product of (1) the total number of directors on the Company Board (giving effect to the directors designated by Parent pursuant to the Merger Agreement) and (2) the percentage that the number of Shares so purchased bears to the total number of Shares then outstanding. Parent intends to choose its designees to the Company Board from those persons listed in Schedule I hereto. The Company has agreed, upon request of the Purchaser, promptly to increase the size of the Company Board or exercise its best efforts to secure the resignations of such number of directors, or both, as is necessary to enable Parent's designees to be so elected to the Company Board and, subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, to cause Parent's designees to be so elected; provided, however, that until the Effective Time there shall be at least two members of the Company Board who are directors as of the date of the Merger Agreement and are not employees of the Company. See Section 11. In connection with the Offer and the Merger, the Company Board has amended the Rights Agreement to render the Rights and the Rights Agreement inapplicable to the Offer, the Merger and the transactions contemplated by the Merger Agreement. The Merger is subject to the satisfaction or waiver of certain conditions, including, if required, the approval and adoption of the Merger Agreement by the affirmative vote of the holders of two-thirds of the 6 9 outstanding Shares. If the Minimum Stock Condition is satisfied, the Purchaser would have sufficient voting power to approve the Merger without the affirmative vote of any other stockholder of the Company. The Company has agreed, if required, to cause a meeting of its stockholders to be held as promptly as practicable following consummation of the Offer for the purposes of considering and taking action upon the approval of the Merger and the approval and adoption of the Merger Agreement. See Section 11. THIS 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. 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 such extension or amendment), the Purchaser will accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not properly withdrawn as permitted under Section 4. The term "Expiration Date" means 12:00 midnight, New York City time, on October 26, 2001, unless the Purchaser, in accordance with the Merger Agreement, extends the period during which the Offer is open, in which event the term "Expiration Date" means the latest time and date on which the Offer, as so extended, expires. The Offer is conditioned upon the satisfaction of the Minimum Stock Condition, the Minimum Note Condition and the other conditions set forth in Section 15. The Purchaser may waive any or all of the conditions to its obligation to purchase Shares pursuant to the Offer (other than the Minimum Stock 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, the Purchaser may elect to (1) terminate the Offer and return all tendered Shares to tendering stockholders, (2) waive all of the unsatisfied conditions (other than the Minimum Stock Condition) and, subject to any required extension, purchase all Shares validly tendered by the Expiration Date and not properly withdrawn or (3) 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. Without the consent of the Company, the Purchaser will not make any change that (1) changes the form or amount of consideration to be paid in the Offer (other than by adding consideration), (2) imposes conditions to the Offer in addition to the conditions to the Offer set forth in Section 15, (3) changes or waives the Minimum Stock Condition or (4) amends any other term of the Offer in a manner materially adverse to the holders of Shares. Subject to the terms of the Merger Agreement, the Purchaser may, without the consent of the Company, extend the Offer beyond the scheduled Expiration Date if any of the conditions to the Purchaser's obligation to accept for payment and to pay for the Shares shall not be satisfied or, to the extent permitted by the Merger Agreement, waived. The Purchaser, however, may not extend the Offer beyond December 28, 2001, without the consent of the Company, except that Parent may extend the Expiration Date after December 28, 2001 as required to comply with any rule, regulation or interpretation of the Securities and Exchange Commission (the "SEC"). Pursuant to Rule 14d-11 under the Exchange Act, the 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 business days to 20 business days in length, beginning after the Purchaser purchases Shares tendered in the Offer, during which stockholders may tender, but not withdraw, their Shares and receive the Offer Price. 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, the Purchaser will promptly purchase and pay for any Shares tendered at the same price paid in the Offer. 7 10 Subject to the applicable rules and regulations of the SEC and the provisions of the Merger Agreement, the Purchaser also expressly reserves the right, in its sole discretion, at any time or from time to time, (1) to terminate the Offer if any of the conditions set forth in Section 15 has not been satisfied and (2) to waive any condition to the Offer (other than the Minimum Stock Condition) or otherwise amend the Offer in any respect, in each case by giving oral or written notice of such extension, termination or waiver or amendment to the Depositary and by making a public announcement thereof. If the Purchaser accepts for payment any Shares pursuant to the Offer, it will accept for purchase all Shares validly tendered prior to the Expiration Date and not properly withdrawn, and will promptly purchase all Shares so accepted for payment. The rights reserved by the Purchaser by the preceding paragraph are in addition to the Purchaser's rights pursuant to Section 15. Any extension, delay, termination, waiver or amendment will be followed as promptly as practicable by public announcement thereof, such announcement in the case of an extension to be made 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 material changes be promptly disseminated to stockholders in a manner reasonably designed to inform them of such changes) and without limiting the manner in which the Purchaser may choose to make any public announcement, the Purchaser shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a press release to the Dow Jones News Service. If the Purchaser extends the Offer or if the Purchaser is delayed in its acceptance for payment of or payment for Shares or it is unable to pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer, the Depositary may retain tendered Shares on behalf of the Purchaser, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to withdrawal rights as described herein under Section 4. However, the ability of the Purchaser to delay the payment for Shares that the Purchaser has accepted for payment is limited by Rule 14e-1(c) under the Exchange Act, which requires that a bidder pay the consideration offered or return the securities deposited by or on behalf of stockholders promptly after the termination or withdrawal of such bidder's offer, unless such bidder elects to offer a Subsequent Offering Period and pays for Shares tendered during the Subsequent Offering Period in accordance with Rule 14d-11 under the Exchange Act. If the 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, the Purchaser will disseminate additional tender offer materials 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 changes to a 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 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 to stockholders. Accordingly, if, prior to the Expiration Date, the Purchaser decreases the number of Shares being sought or increases 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 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. The Company has provided the Purchaser with a list of the stockholders of the Company and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase and the related Letter of Transmittal will be mailed to record holders of Shares whose names appear on the Company's stockholder list and will be furnished, for subsequent transmittal to beneficial owners of Shares, 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. 8 11 2. 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 such extension or amendment) and the satisfaction or waiver of all the conditions to the Offer set forth in Section 15, the Purchaser will accept for payment and will pay for, as soon as practicable after the Expiration Date, all Shares validly tendered and not properly withdrawn on or prior to the Expiration Date. Subject to the Merger Agreement and compliance with Rule 14e-1(c) under the Exchange Act, the Purchaser expressly reserves the right to delay acceptance for payment of Shares in order to comply in whole or in part with any applicable law. See Section 16. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (1) the certificates evidencing such Shares (the "Share Certificates") or timely confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in Section 3, (2) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees or, in the case of a book-entry transfer, an Agent's Message (as defined below) in lieu of the Letter of Transmittal and (3) any other documents required under the Letter of Transmittal. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not properly withdrawn as, if and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance for payment of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the Offer Price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payments from the Purchaser and transmitting such payments to tendering stockholders whose Shares have been accepted for payment. 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 the Purchaser's rights under Section 1 hereof, the Depositary may, nevertheless, on behalf of the 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 4 and as otherwise required by Rule 14e-1(c) under the Exchange Act. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE OFFER PRICE FOR SHARES BE PAID, REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT. If any tendered Shares are not accepted for payment for any reason pursuant to the terms and conditions of the Offer, or if Share Certificates are submitted evidencing more Shares than are tendered, Share Certificates evidencing unpurchased Shares will be returned, without expense to the tendering stockholder (or, in the case of Shares tendered by book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility pursuant to the procedure set forth in Section 3, such Shares will be credited to an account maintained at the Book-Entry Transfer Facility), as promptly as practicable following the expiration or termination of the Offer. The Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its affiliates, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve the 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. 3. PROCEDURES FOR TENDERING SHARES. Valid Tenders. In order for a stockholder validly to tender Shares pursuant to the Offer, either (1) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message in lieu of the Letter of Transmittal) and any other documents required by the Letter of Transmittal must be 9 12 received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and either the Share Certificates evidencing tendered Shares must be received by the Depositary at such address or such Shares must be tendered pursuant to the procedure for book-entry transfer described below and a Book-Entry Confirmation must be received by the Depositary, in each case prior to the Expiration Date, or (2) the tendering stockholder must comply with the guaranteed delivery procedures described below. The term "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, that states that the Book-Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility tendering the Shares that are the subject of such Book-Entry Confirmation, that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that Purchaser may enforce such agreement against such participant. Book-Entry Transfer. The Depositary will establish an account with respect to the Shares at the Book-Entry Transfer Facility for purposes of the Offer within two business days after the date of this Offer. Any financial institution that is a participant in the system of the Book-Entry Transfer Facility may make a book-entry delivery of Shares by causing the Book-Entry Transfer Facility to transfer such Shares into the Depositary's account at the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer Facility's procedures for such transfer. However, although delivery of Shares may be effected through book-entry transfer at the Book-Entry Transfer Facility, either the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or an Agent's Message in lieu of the Letter of Transmittal, and any other required documents, must, in any case, be 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 tendering stockholder must comply with the guaranteed delivery procedure described below. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Signature Guarantees. No signature guarantee is required on the Letter of Transmittal (1) if the 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" on the Letter of Transmittal or (2) if the Shares are tendered for the account of a firm which is participating in the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program (each an "Eligible Institution" and collectively "Eligible Institutions"). 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 Share Certificate is registered in the name of a person or persons other than the signer of the Letter of Transmittal, or if payment is to be made or delivered to, or a Share Certificate not accepted for payment or not tendered is to be issued, in the name of a person other than the registered holder(s), then the Share Certificate must be endorsed or accompanied by appropriate duly executed stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear on the Share Certificate, with the signature(s) on such Share Certificate or stock powers guaranteed by an Eligible Institution as provided in the Letter of Transmittal. See Instructions 1 and 5 of the Letter of Transmittal. Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to the Offer and the Share Certificates evidencing such stockholder's Shares are not immediately available or such stockholder cannot deliver the Share Certificates and all other required documents to the Depositary prior to the Expiration 10 13 Date, or such stockholder cannot complete the procedures for delivery by book-entry transfer on a timely basis, such Shares may nevertheless be tendered; provided that all of the following conditions are satisfied: (1) such tender is made by or through an Eligible Institution; (2) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by Purchaser, is received prior to the Expiration Date by the Depositary as provided below; and (3) the Share Certificates (or a Book-Entry Confirmation) evidencing all tendered Shares, in proper form for transfer, in each case together with the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees (or, in the case of 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 New York Stock Exchange trading days after the date of execution of such Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand, mail or facsimile transmission to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in the form of Notice of Guaranteed Delivery made available by Purchaser. In all cases, Shares shall not be deemed validly tendered unless a properly completed and duly executed Letter of Transmittal (or a facsimile thereof) (or, in the case of a book-entry transfer, an Agent's Message in lieu of the Letter of Transmittal) is received by the Depositary. THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, A BOOK-ENTRY CONFIRMATION). 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 RECEIPT. Determination of Validity. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by the Purchaser, in its sole discretion, which determination shall be final and binding on all parties. The Purchaser reserves the absolute right to reject any and all tenders determined by it not to be in proper form or the acceptance for payment of which may, in the opinion of its counsel, be unlawful. The Purchaser also reserves the absolute right to waive any defect or irregularity in the tender of any Shares of any particular stockholder, whether or not similar defects or irregularities are waived in the case of other stockholders. No tender of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived to the satisfaction of the Purchaser. None of Parent, the Purchaser, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. The Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. Other Requirements. By executing the Letter of Transmittal as set forth above, a tendering stockholder irrevocably appoints designees of the Purchaser as such stockholder's proxies, each with full power of substitution, in the manner set forth in the Letter of Transmittal, to the full extent of such stockholder's rights with respect to the Shares tendered by such stockholder and accepted for payment by the Purchaser (including, with respect to any and all other Shares or other securities issued or issuable in respect of such Shares on or after the date of this Offer). All such proxies shall be considered coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, the Purchaser accepts such Shares for payment. Upon such acceptance for payment, all prior proxies given by such stockholder with respect to such Shares (or such other Shares or securities) will be revoked without further action, and no subsequent proxies may be given nor any subsequent written consent executed by such stockholder (and, if given or executed, will not be deemed to be effective) with respect thereto. The designees of the Purchaser will, with respect to the Shares and other securities for which the 11 14 appointment is effective, be empowered to exercise all voting and other rights of such stockholder as they in their sole discretion may deem proper at any annual or special meeting of the Company's stockholders or any adjournment or postponement thereof, by written consent in lieu of any such meeting or otherwise. The Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser's payment for such Shares, the Purchaser must be able to exercise full voting rights with respect to such Shares. The tender of Shares pursuant to any one of the procedures described above will constitute the tendering stockholder's acceptance of the Offer, as well as the tendering stockholder's representation and warranty that such stockholder has the full power and authority to tender and assign the Shares tendered, as specified in the Letter of Transmittal. The Purchaser's acceptance for payment of Shares tendered pursuant to the Offer will constitute a binding agreement between the tendering stockholder and the Purchaser upon the terms and subject to the conditions of the Offer. Backup Withholding. In order to avoid "backup withholding" of U.S. federal income tax on payments of cash pursuant to the Offer, a stockholder tendering Shares in the Offer must, unless an exemption applies, provide the Depositary with such stockholder's correct taxpayer identification number ("TIN") on a Substitute Form W-9 and certify under penalties of perjury that such TIN is correct and that such stockholder is not subject to backup withholding. If a stockholder does not provide such stockholder's correct TIN or fails to provide the certifications described above, the Internal Revenue Service (the "IRS") may impose a penalty on such stockholder and payment of cash to such stockholder pursuant to the Offer may be subject to backup withholding at a rate equal to the fourth lowest rate applicable to ordinary income of unmarried individuals (for payments made after August 6, 2001 and before January 1, 2002, the backup withholding rate is 30.5%). All stockholders surrendering Shares pursuant to the Offer should complete and sign the main signature form and the Substitute Form W-9 included as part of the Letter of Transmittal to provide the information and certification necessary to avoid backup withholding (unless an applicable exemption exists and is proved in a manner satisfactory to the Purchaser and the Depositary). Certain stockholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. Noncorporate foreign stockholders should complete and sign the main signature form and a Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. See Instruction 9 to the Letter of Transmittal. 4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are irrevocable, except that such Shares may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by the Purchaser pursuant to the Offer, may also be withdrawn at any time after Monday, November 26, 2001 (or such later date as may apply if the Offer is extended). However, Shares tendered in any Subsequent Offering Period may not be withdrawn. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover page of this Offer to Purchase. Any such notice of withdrawal must specify the name, address and TIN of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of such Shares, if different from that of the person who tendered such Shares. If Share Certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such Share Certificates, the serial numbers shown on such Share Certificates must be submitted to the Depositary and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution, unless such Shares have been tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer as set forth in Section 3 hereof, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares. 12 15 If the Purchaser extends the Offer, is delayed in its acceptance for payment of the Shares or is unable to accept Shares for payment pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer, the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent that tendering stockholders are entitled to withdrawal rights as described herein. All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by the Purchaser, in its sole discretion, whose determination will be final and binding. None of Parent, the Purchaser, the Depositary, the Information Agent or any other person will be under duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn will thereafter be deemed not to have been validly tendered for purposes of the Offer. However, withdrawn Shares may be re-tendered at any time prior to the Expiration Date by following one of the procedures described in Section 3 hereof. No withdrawal rights will apply to Shares tendered during any 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. 5. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS. The receipt of cash pursuant to the Offer or the Merger will be a taxable transaction for U.S. federal income tax purposes under the Internal Revenue Code of 1986, as amended (the "Code"), and may also be a taxable transaction under applicable state, local or foreign income or other tax laws. Generally, for U.S. federal income tax purposes, a tendering stockholder will recognize gain or loss equal to the difference between the amount of cash received by the stockholder pursuant to the Offer or the Merger and the stockholder's aggregate adjusted tax basis in the Shares tendered by the stockholder and purchased pursuant to the Offer or converted into cash in the Merger, as the case may be. Gain or loss will be calculated separately for each block of Shares tendered and purchased pursuant to the Offer or converted into cash in the Merger, as the case may be. If tendered Shares are held by a tendering stockholder as capital assets, gain or loss recognized by such stockholder will be capital gain or loss, which will be long-term capital gain or loss if such stockholder's holding period for the Shares exceeds one year. In the case of a tendering noncorporate shareholder, long-term capital gains will be eligible for a maximum U.S. federal income tax rate of 20%. In addition, there are limits on the deductibility of capital losses. A stockholder (other than certain exempt stockholders including, among others, all corporations and certain foreign individuals) that tenders Shares may be subject to backup withholding at a rate equal to the fourth lowest rate applicable to ordinary income of unmarried individuals (for payments made after August 6, 2001 and before January 1, 2002, the backup withholding rate is 30.5%) unless the stockholder provides its TIN and certifies under penalties of perjury that such TIN is correct (or properly certifies that it is awaiting a TIN) and certifies as to no loss of exemption from backup withholding and otherwise complies with the applicable requirements of the backup withholding rules. A stockholder that does not furnish a required TIN or that does not otherwise establish a basis for an exemption from backup withholding may be subject to a penalty imposed by the IRS. See "Backup Withholding" under Section 3. Each stockholder should complete and sign the Substitute Form W-9 included as part of the Letter of Transmittal so as to provide the information and certification necessary to avoid backup withholding. If backup withholding applies to a stockholder, the Depositary is required to withhold on payments made to such stockholder at a rate equal to the fourth lowest rate applicable to ordinary income of unmarried individuals (for payments made after August 6, 2001 and before January 1, 2002, the backup withholding rate is 30.5%). Backup withholding is not an additional tax. Rather, the amount of the backup withholding can be credited against the U.S. federal income tax liability of the person subject to the 13 16 backup withholding, provided that the required information is given to the IRS. If backup withholding results in an overpayment of tax, a refund can be obtained by the stockholder by filing a U.S. federal income tax return. The foregoing discussion is based on the Code, regulations issued thereunder, judicial decisions and administrative rulings, all of which are subject to change, possibly with retroactive effect. This discussion does not address all of the U.S. federal income tax consequences that may be relevant to particular stockholders in light of their individual circumstances or to stockholders who are subject to special rules, such as: non-U.S. persons; financial institutions; tax-exempt organizations; insurance companies; dealers or brokers in securities or currencies; stockholders who acquired their shares upon the exercise of employee stock options or otherwise as compensation; or stockholders who hold their shares as part of a hedge, straddle, synthetic security, conversion transaction, integrated investment or other risk-reduction transaction. THE SUMMARY OF TAX CONSEQUENCES SET FORTH ABOVE IS FOR GENERAL INFORMATION ONLY AND IS BASED ON THE LAW IN EFFECT ON THE DATE HEREOF. STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL, OR FOREIGN INCOME AND OTHER TAX LAWS) OF THE OFFER AND THE MERGER. 6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares trade on the American Stock Exchange under the symbol "GCR." The following table sets forth, for the periods indicated, the high and low sale prices per Share for the periods indicated. The Rights trade together with the Common Stock. Share prices are as reported on the American Stock Exchange based on published financial sources.
COMMON STOCK --------------- HIGH LOW ------ ------ Fiscal Year 1999: First Quarter............................................. $ 6.25 $ 2.25 Second Quarter............................................ 7.94 5.75 Third Quarter............................................. 8.75 6.06 Fourth Quarter............................................ 8.69 6.56 Fiscal Year 2000: First Quarter............................................. 7.50 5.63 Second Quarter............................................ 7.75 4.88 Third Quarter............................................. 6.38 2.69 Fourth Quarter............................................ 3.75 1.63 Fiscal Year 2001: First Quarter............................................. 2.50 0.88 Second Quarter............................................ 1.98 1.00 Third Quarter............................................. 1.34 0.91 Fourth Quarter (through September 27)..................... 1.30 0.60
On September 27, 2001, the last full day of trading before the public announcement of the execution of the Merger Agreement and the commencement of the Offer, the closing price of the Shares on the American Stock Exchange was $0.69 per Share. Stockholders are urged to obtain a current market quotation for the Shares. The Company did not declare or pay any cash dividends during any of the periods indicated in the above table. In addition, under the terms of the Merger Agreement, the Company is not permitted to declare or pay dividends with respect to the Shares without the prior written consent of Parent, and Parent does not intend to consent to any such declaration or payment. 14 17 7. CERTAIN INFORMATION CONCERNING THE COMPANY. General. The Company is a Delaware corporation with its principal offices located at 500 Lake Cook Road, Suite 400, Deerfield, Illinois 60015. The telephone number of the Company is (847) 405-5500. According to the Company's Form 10-K for the fiscal year ended September 30, 2000, the Company operates three containerboard and unbleached kraft paper mills, fourteen corrugated container plants, four corrugated sheet feeder plants, two multiwall bag plants, five retail bag plants, a preprint and graphics center, a cogeneration facility and, through a wholly-owned, independently-operated subsidiary, a specialty chemical facility. Financial Information. Certain financial information relating to the Company is hereby incorporated by reference to the audited financial statements for the Company's 1999 and 2000 fiscal years set forth in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, 2000, beginning on page 17 of such report. The report may be inspected at, and copies may be obtained from, the same places and in the same manner set forth under "Available Information" below. 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 required 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 executive 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 proxy statements distributed to the Company's stockholders and filed with the SEC. Such reports, proxy statements and other information can be inspected and copied at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the SEC's regional office located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Information regarding the public reference facilities may be obtained from the SEC by telephoning 1-800-SEC-0330. The Company's filings are also available to the public on the SEC's Internet site (http://www.sec.gov). Copies of such materials may also be obtained by mail from the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Reports and other information concerning the Company can be inspected at the offices of the American Stock Exchange, 88 Trinity Place, 5th Floor, Library, New York, New York 10006. 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 the Purchaser nor Parent has any knowledge that would indicate that any statements contained herein based upon such reports and documents are untrue, neither the 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 the Purchaser or Parent. 8. CERTAIN INFORMATION CONCERNING PARENT AND THE PURCHASER. General. Parent is a Delaware corporation with its principal offices located at 1300 MoPac Expressway South, Austin, Texas 78746. The telephone number of Parent is (512) 434-8000. Parent is a holding company that conducts all of its operations through its subsidiaries. The business of Parent is divided among three groups: (1) the Paper Group manufactures corrugated packaging products, (2) the Building Products Group manufactures a wide range of building products and manages Parent's forest resources of approximately 2.2 million acres of timberland in Texas, Louisiana, Georgia, and Alabama, and (3) the Financial Services Group consists of savings bank, mortgage banking, real estate and insurance brokerage activities. The Paper Group, of which the Company would be a part after the Merger, is a vertically integrated corrugated packaging operation that is operated by Inland Paperboard and Packaging, Inc., and consists of four linerboard mills, one corrugating medium mill, fifty-two box plants, and eight specialty converting plants. 15 18 The Purchaser is a newly incorporated Delaware corporation organized in connection with the Offer and the Merger. The principal offices of the Purchaser are located at 1300 MoPac Expressway South, Austin, Texas 78746. The telephone number of the Purchaser is (512) 434-8000. The Purchaser is an indirect, wholly-owned subsidiary of Parent. The Purchaser has not carried on any activities other than in connection with the Merger Agreement. The name, citizenship, principal 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 the Purchaser and certain other information are set forth in Schedule I hereto. None of the persons listed in Schedule I has, 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 has, during the past five years, been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction of 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. Except as described in this Offer to Purchase and Schedule I hereto, (1) none of Parent, the Purchaser nor, to the best knowledge of Parent and the Purchaser, any of the persons listed in Schedule I to this Offer or any associate or majority-owned subsidiary of Parent or the 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, the Purchaser nor, to the best knowledge of Parent and the 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 or as otherwise described in this Offer to Purchase, none of Parent, the Purchaser nor, to the best knowledge of Parent and the 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, guarantees of profits, division of profits or loss or the giving or withholding of proxies. Except as set forth in this Offer to Purchase and Schedule I hereto, none of Parent, the Purchaser nor, to the best knowledge of Parent and the Purchaser, any of the persons listed on Schedule I hereto, has 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 and Schedule I hereto, there have been no contracts, 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, exchange offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets. 9. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. The Purchaser's obligation to purchase Shares under the Offer is not conditioned on any financing arrangements or subject to any financing condition. The total amount of funds required by the Purchaser to consummate the Offer and the Merger is estimated to be approximately $101 million, plus any related transaction fees and expenses, including severance amounts. Parent estimates that the total amount of funds required to consummate the Offer, the Merger, the Notes Tender Offers, assuming tender of all the Notes, and to satisfy all the bank debt and other senior secured obligations, is approximately $786 million, plus any related transaction fees and expenses. Parent will provide the Purchaser with the funds. Parent expects to obtain the funds in accordance with the terms of a commitment letter, dated September 26, 2001, that it entered into with Citibank, N.A., as administrative agent, and Salomon Smith Barney Inc., as sole arranger, book manager and 16 19 syndication agent. Pursuant to the commitment letter, Citibank intends to make available to Parent up to $900,000,000 under a 364-day credit facility. The commitment letter provides that Parent, Citibank and Salomon Smith Barney will enter into appropriate loan documentation for the credit facilities. The commitment letter contains, and the loan documentation will contain, representations and warranties, conditions precedent, covenants, events of default and other provisions customarily found in similar agreements. The facility will be secured by a first-priority pledge of the acquired debt and capital stock of the Company, as well as by a first-priority pledge of the capital stock of the Purchaser. Additionally, up to $250,000,000 of the facility will be secured by a first-priority lien on certain assets of Parent and its subsidiaries. The stated interest rate for the credit facility shall be LIBOR (to be defined in the loan documentation) plus 100 basis points, with an effective rate of LIBOR plus 150 basis points. The commitment letter has been filed as an exhibit to the Tender Offer on Schedule TO filed by Parent and the Purchaser pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act with the SEC in connection with the Offer. The above summary is not a complete description of the terms and conditions of the commitment letter, and is qualified in its entirety by reference to the full text of the commitment letter. At this time Parent has not made any alternative financing arrangements or plans if financing cannot be obtained through this credit facility. Parent intends to repay borrowings under the credit facility from working capital and funds provided by future operations, and to refinance any outstanding borrowings on or prior to the maturity date. While Parent has no specific arrangements in this regard at this time, Parent currently expects that it will be able to obtain any refinancing on commercially reasonable terms at the time. 10. BACKGROUND OF THE OFFER; PAST CONTACTS OR NEGOTIATIONS WITH THE COMPANY. During January 2000, financial advisors of the Company contacted Parent's management and others regarding the Company's desire to present financial information to Parent and others to ascertain interest in a potential transaction involving the Company. On January 19, 2000, Parent entered into a confidentiality agreement with the Company. In such agreement Parent agreed not to, and not to encourage or assist others to, for a period of two years, (1) acquire any voting securities or assets of the Company, (2) propose any form of business combination or similar transaction relating to the Company, (3) participate in any proxy solicitation of the Company's voting securities, (4) participate in a group with respect to the Company's voting securities, (5) discuss with third parties any of the foregoing, (6) disclose any intention or plan inconsistent with the foregoing, (7) seek control of the management, board of directors or policies of the Company or (8) request the Company to amend such provisions in the confidentiality agreement, without the prior written consent of the Company. The agreement provides for such standstill provisions to terminate upon the earlier of (a) the execution of an agreement by the Company providing for a sale of all or substantially all of the Company's assets or a combination of the Company with another entity other than one in which the stockholders of the Company immediately before such combination hold immediately after the combination, at least 51% of the voting securities of the combined entity or (b) any group shall have commenced a tender or exchange offer intending to acquire 51% or more of the Company's capital stock entitled to vote in the election of directors or acquired or announced an intention to acquire such a controlling interest. After execution of the confidentiality agreement, the Company provided certain information to Parent. Following review of that information, Parent determined that the expected enterprise value of the Company and any potential offer by Parent to enter into a transaction with the Company would not be sufficient to satisfy the Company's debtholders' and equityholders' expectations. Parent elected not to enter into negotiations for a transaction at that time and returned the material received by Parent to the Company. 17 20 Between March 2000 and November 2000, Kenneth Jastrow, Chairman and Chief Executive Officer of Parent, and Marvin A. Pomerantz, Chairman and Chief Executive Officer of the Company, engaged in occasional preliminary discussions about a possible transaction between Parent and the Company. On November 7, 2000, representatives of Salomon Smith Barney met with senior management of Parent to discuss the attractiveness and viability of Parent acquiring the Company. On November 13, 2000, Salomon Smith Barney sent follow-up information to Parent's senior management. On November 16, 2000, Mr. Jastrow had a preliminary phone conversation with Mr. Pomerantz regarding a possible transaction. On November 18, 2000, Mr. Jastrow met with Mr. Pomerantz in Des Moines, Iowa, to discuss the initial concept for structuring a transaction. On December 8, 2000, Parent's Board of Directors met by telephone, and Salomon Smith Barney presented information regarding the value, timing and structure of a proposed transaction. Parent's Board of Directors authorized the officers of Parent to further pursue the transaction, to continue negotiations and to conduct appropriate due diligence. On December 15, 2000, Mr. Jastrow met with Mr. Pomerantz and Daniel P. Casey, Vice Chairman and Chief Financial Officer of the Company, in Chicago at which meeting Mr. Jastrow delivered a letter dated December 14, 2000 to Mr. Pomerantz to propose a business combination in which Parent would acquire all of the outstanding stock of the Company. The proposal also contemplated the retirement of the Company's debt. On December 20, 2000, Parent executed an engagement letter with Salomon Smith Barney to advise Parent in connection with the possible acquisition of the Company. Later that day, the Company's and Parent's financial advisors met by conference call to review the value, timing and structure of the transaction. On December 28, 2000, and on January 5, 2001, Parent's financial advisors sent letters to Mr. Pomerantz with additional information regarding market conditions, additional back-up information and additional information addressing open issues. On January 10, 2001, the Company's Board of Directors met to discuss the transaction proposed by Parent. The Company's senior management and financial advisors described for the Board the terms and conditions of Parent's offer and the Company's outside legal advisors reviewed the fiduciary duties of the directors. Following a discussion of the terms, structure and value of the proposed transaction and other related issues, the Company's Board of Directors directed management to pursue the proposed transaction. On January 15, 2001, at the request of the Company's advisors, representatives from Salomon Smith Barney, Deutsche Banc and Rothschild met at Salomon Smith Barney's headquarters in New York to review the value, timing and structure of the transaction. On January 23, 2001, at the request of Deutsche Banc, representatives from Salomon Smith Barney, Deutsche Banc and Rothschild participated in a conference call to follow up on the meeting of such advisors on January 15, 2001. On January 29, 2001, Messrs. Jastrow and M. Richard Warner, Chief Administrative Officer of Parent, met with Messrs. Pomerantz and Casey, along with Salomon Smith Barney, Deutsche Banc and Rothschild, in Chicago to further discuss pricing and structure of a potential transaction. On February 2, 2001, a conference call was held by the Company's and Parent's financial advisors to discuss a possible transaction. On February 2, 2001, at a regular meeting of Parent's Board of Directors, Parent's management updated Parent's Board of Directors on the status of discussions and negotiations. Parent's Board of Directors approved continuation of the negotiation process and due diligence on the transaction. 18 21 On February 5, 2001, Salomon Smith Barney and Deutsche Banc met by conference call to review Deutsche Banc's methodology and valuation assumptions. On February 7, 2001, at a regular meeting of the Company's Board of Directors, the Company's senior management and financial advisors updated the directors on the status of their discussions with Parent and its financial advisors. The Company's outside legal advisors once again reviewed the fiduciary duties of the directors. After a discussion of the terms, structure and value of the proposed transaction and other related matters, the Board directed management to continue to pursue the transaction with Parent and to report on any significant developments. On February 15, 2001, Messrs. Jastrow and Warner met with Messrs. Pomerantz and Casey in California to discuss the value, timing and structure of a potential transaction. Parent and the Company determined to proceed with the negotiation of a potential transaction. On March 8 and 9, 2001, representatives of Parent conducted preliminary due diligence and met with representatives to discuss the potential transaction and outline further due diligence requirements. On March 13, 2001, the Company executed an engagement letter with Deutsche Banc to provide advisory and investment banking services with respect to the exploration of strategic alternatives. This letter superceded the Company's prior engagement letter with Deutsche Banc dated December 9, 1999. On March 19, 2001, representatives of Parent performed further due diligence review of information assembled by the Company. On March 27, 2001, the Company executed an engagement letter with Rothschild pursuant to which Rothschild would serve as co-financial advisor for the purpose of rendering financial advice to the Company in connection with a possible strategic transaction. This letter superceded the Company's prior engagement letter with Rothschild dated March 27, 2000. On March 29, 2001, Mr. Jastrow and Mr. Pomerantz met by phone, and Mr. Jastrow advised that based on concerns about the Company's chemical release litigation, Parent did not desire to proceed further at that time with negotiations of a possible transaction on terms previously discussed. On May 1, 2001, Mr. Jastrow met with Mr. Pomerantz in Burnet, Texas to continue to discuss a possible transaction between Parent and the Company. On May 4, 2001, a meeting of Parent's Board of Directors was held at which the Board of Directors directed Parent's management to undertake a due diligence review of certain litigation issues with respect to the Company and to delay further negotiations with the Company pending completion of the review. On May 8, 2001, Mr. Warner discussed with Mr. Casey Parent's due diligence findings and Mr. Casey updated Mr. Warner on the status of the Company's chemical release litigation. On May 8, 2001, at a special meeting of the Company's Board of Directors, the Company's financial advisors indicated to the Board that Parent had renewed its interest in a transaction with the Company and reviewed with the Board the details of Parent's proposal. After a discussion of the proposal, issues germane to the transaction and other related matters, the Board directed management to continue to pursue Parent's transaction proposal. On June 6, 2001, at a regular meeting of the Company's Board of Directors, Mr. Pomerantz reviewed the status of the negotiations with Parent. On June 7, 2001, Messrs. Jastrow and Warner met with Messrs. Pomerantz and Casey in Des Moines, Iowa to discuss the pricing and timing of a potential transaction. On June 13, 2001, Messrs. Jastrow and Warner met with Messrs. Pomerantz and Casey in Des Moines, Iowa to further discuss a potential transaction. On June 15, 2001, at a special meeting of the Company's Board of Directors, the Board was updated on the negotiations with Parent. Mr. Pomerantz reported that management had met recently with Parent's 19 22 representatives and that Parent was currently proposing simultaneous equity and debt tender offers, each contingent upon the success of the other, in which Parent would offer a combination of cash and Parent stock for all of the Company's outstanding stock. The Board then discussed the terms, structure and value of the new proposed transaction and other related matters. The Company's outside legal advisors also reviewed with the Board their fiduciary duties. After further discussion, the Board directed management to pursue the transaction with Parent and to seek to maximize the value obtained in the transaction. On June 19, 2001, Mr. Warner met with Mr. Casey, along with Salomon Smith Barney, Deutsche Banc and Rothschild, in Chicago to further discuss the pricing and structure of a potential transaction. On July 3, 2001, Mr. Jastrow delivered a letter to Mr. Pomerantz outlining the terms of Parent's proposal, which included an equity exchange offer (subject to a partial cash election option for Parent) for at least two-thirds of the Company's outstanding shares at a collared exchange rate equal to $1.50 per share of the Company, purchasing all of the Company's bank debt at par and at least 90% of each class of notes at a discount to par through a debt tender offer, and assuming the Company's severance and change of control and advisory fee obligations in amounts not to exceed $55 million and $10 million, respectively, to be paid in Parent stock. On July 17, 2001, Messrs. Jastrow and Warner met with Messrs. Pomerantz and Casey, along with Salomon Smith Barney, Deutsche Banc and Rothschild, in Chicago to discuss the potential transaction. On July 18, 2001, Mr. Warner had a phone conversation with Mr. Casey to discuss issues related to the terms of the Offer and the Merger. On that same day, Mr. Jastrow met with Mr. Pomerantz in San Francisco, California to discuss the pricing of the equity component of a potential transaction. On July 26, 2001, the Company's Board of Directors met and the Company's senior management and financial advisors updated the Board on the status of their discussions with Parent and its financial advisors and described the terms and conditions of Parent's new transaction proposal. The Company's outside legal advisors also reviewed the fiduciary duties of the directors. Following a discussion of the terms, structure and value of the new proposed transaction and other related matters, the Board of Directors directed management to continue to pursue the new transaction. On August 3, 2001, a regular meeting of Parent's Board of Directors was held at which it was determined that the acquisition would be proposed pursuant to an all cash tender offer at $1.80 per share followed by a merger. On August 7, 2001, at a regular meeting of the Company's Board of Directors, the Company's management and financial advisors updated the Board on Parent's new proposal for an all-cash tender offer to acquire the Company's debt and equity securities in simultaneous tender offers. Members of the Company's management also reviewed with the Board the historical financial performance and prospects of the Company. The Company's outside legal advisors again reviewed for the directors their fiduciary duties. After a discussion of the terms of the new offer, the status of the parties' due diligence efforts and other related matters, the Board authorized management to continue discussions with Parent. On August 16, 2001, the Company executed an amendment to its engagement letter with Rothschild. On August 21, 2001, representatives of the Parent, including Mr. Warner and Parent's financial and legal advisors and representatives of the Company, including Mr. Casey, and the Company's financial and legal advisors met in Chicago to discuss and negotiate certain issues relating to the potential transaction. On August 24, 2001, a special meeting of the Company's Board of Directors was held to update the Board on Parent's proposal. The Company's financial advisors again summarized the terms of Parent's proposed transaction and presented a preliminary valuation analysis of the proposed transaction. The Company's financial advisors also outlined the steps necessary to complete the proposed transaction. The Company's outside legal advisors again also reviewed the fiduciary duties of the directors. The Board then discussed the terms, structure and value of the proposed transaction and other related matters. 20 23 On September 7, 2001, Parent's Board of Directors held a special meeting by teleconference at which it considered the structure, pricing and timing of a potential transaction and reviewed management's due diligence investigation findings. Salomon Smith Barney further updated and advised the Parent's Board of Directors on financial valuation matters. On September 7, 2001, the Company's Board of Directors held a special meeting at which it considered the proposed financial terms and conditions of the Offer and the Merger. At that meeting, the Company's legal advisors again reviewed the directors' fiduciary duties in considering the proposed transaction and the principal terms and conditions of the proposed transaction, including the principal terms and conditions of the proposed Merger Agreement and the amendment to the Rights Agreement. Members of the Company's management reviewed with the Board the Company's business, market conditions and prospects. The Company's financial advisors further updated and advised the Board on financial valuation matters and each of Deutsche Banc and Rothschild provided its oral opinion (subsequently confirmed in writing) to the Board that, as of the date of such opinion and subject to the assumptions made, matters considered and limitations on the review undertaken set forth in its written opinion, the $1.80 in cash per Share to be received by the stockholders in the Offer and the Merger was fair, from a financial point of view, to such holders. The Board then discussed the presentations and the drafts of the various documents it had received at this and other Board meetings and further discussed the terms and conditions of other business combinations in the Company's industry deemed relevant, the scope and history of the Company's negotiations with Parent and certain other matters. The Board then declared that the Offer and Merger were fair to, and in the best interests of, the Company's stockholders, unanimously adopted, approved and declared advisable the Merger Agreement, the Offer, the Merger and the amendment to the Rights Agreement and unanimously resolved to recommend that the stockholders of the Company accept the offer and tender their Shares. The Board then formed the Subcommittee, consisting of Messrs. Pomerantz and Casey, and delegated to the Subcommittee the authority to approve any final changes to the Merger Agreement and related documents. On September 27, 2001, the Company's Subcommittee of the Board acted by unanimous written consent and approved the changes and modifications to the form, terms and provisions of the Merger Agreement and related documents occurring since September 7, 2001. On September 27, 2001, Parent's Board of Directors acted by unanimous written consent and declared that the Offer and Merger were fair to, and in the best interests of, Parent and its stockholders and unanimously adopted, approved and declared advisable the Merger Agreement, the Offer, the Merger, and the other transactions contemplated by the Merger Agreement. On September 27, 2001, the Merger Agreement was executed by Parent, the Purchaser and the Company. On September 27, 2001, Parent and the Company issued a joint press release announcing the transaction. On September 28, 2001, the Purchaser commenced the Offer. During the Offer, Parent and the Purchaser intend to have ongoing contacts with the Company and its directors, officers and stockholders. 11. THE MERGER AGREEMENT; OTHER ARRANGEMENTS. The Merger Agreement The following is a summary of the material provisions of the Merger Agreement, a copy of which is filed as an exhibit to the Tender Offer Statement on Schedule TO filed by Parent and the Purchaser pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act with the SEC in connection with the Offer (the "Schedule TO"). The summary is qualified in its entirety by reference to the Merger Agreement, which is incorporated by reference herein. 21 24 The Offer. The Merger Agreement provides for the making of the Offer. The obligation of the Purchaser to accept for payment and pay for Shares tendered pursuant to the Offer is subject to the satisfaction or waiver of the Minimum Stock Condition, the Minimum Note Condition, the HSR Condition and certain other conditions that are described in Section 15. The Notes Tender Offers. Pursuant to the Merger Agreement, as promptly as reasonably practicable after the date of the Merger Agreement, but in no event later than five business days after the first public announcement of the execution thereof, and upon the terms and subject to the conditions of the Merger Agreement, Parent or its designee will commence the Notes Tender Offers. In connection with such Notes Tender Offers, Parent intends to solicit consents to amend, eliminate or waive certain sections of the Indenture relating to the 9 3/8% Senior Notes, dated as of February 23, 1998 among the Company, the guarantors party thereto and State Street Bank and Trust Company, as trustee, the Indenture relating to the 9 3/4% Senior Notes, dated as of June 12, 1997 among the Company, the guarantors party thereto and Fleet National Bank, as trustee, and the Indenture relating to the Senior Subordinated Notes, dated as of February 23, 1998 among the Company, the guarantors party thereto and Chase Bank of Texas, National Association, as trustee (collectively, the "Indentures"), as set forth in the Offer to Purchase and Consent Solicitation Statement made by Parent or its designee in connection with the Notes Tender Offers (as amended from time to time, the "Notes Offer to Purchase"). Parent's obligation to accept for payment and pay for the Notes and related consents tendered pursuant to the Notes Tender Offers is subject to the conditions that (1) the aggregate principal amount of each series of Notes validly tendered and not withdrawn prior to the expiration of the Notes Tender Offers, combined with the Notes already owned by Parent, the Purchaser and their affiliates, constitutes at least 90% of the aggregate principal amount of each of the 9 3/8% Senior Notes, the 9 3/4% Senior Notes and the Senior Subordinated Notes outstanding at the expiration of the Notes Tender Offer with respect to each of such series of Notes, (2) Parent receives consents from at least a majority of the outstanding principal amount of each series of the Notes and (3) other conditions (including, without limitation, the Minimum Stock Condition). See Section 15. The Notes Tender Offers shall be made at an amount in cash set forth in the Notes Offer to Purchase. In the Merger Agreement, Parent expressly reserved the right to waive any condition (including without limitation the Minimum Note Condition), to increase the price payable for each Note and related consent tendered in the Notes Tender Offers, and to make any other changes in the terms and conditions of the Notes Tender Offers; provided, however, that, without the consent of the Company, no change may be made which decreases the price payable for each Note and related consent tendered in the Notes Tender Offers, which increases the Minimum Note Condition, which eliminates the Minimum Stock Condition, which amends or eliminates any section of the Indentures, that by the terms thereof, requires approval of the holders of 100% of the outstanding principal amount of the Notes, which otherwise modifies or amends the conditions to the Notes Tender Offers or any other term of the Notes Tender Offers in a manner that is materially adverse to the tendering holders of the Notes, which imposes additional conditions to the Notes Tender Offers, or which extends the expiration date of the Notes Tender Offers beyond December 28, 2001 (except that Parent may extend the expiration date of the Notes Tender Offers after December 28, 2001 as required to comply with any rule, regulation or interpretation of the SEC or to coincide with the termination date of the Offer); provided, however, that Parent expressly reserved the right, in its sole discretion, to reduce the minimum percentage of any series of Notes to be purchased in the Notes Tender Offers. Subject to the terms and conditions of the Notes Tender Offers (including, without limitation, the Minimum Note Condition), Parent has agreed to accept for payment and to pay for, as promptly as practicable after expiration of the Notes Tender Offers, all Notes and related consents validly tendered and not withdrawn. At such time as Parent receives consents from at least a majority of each series of the outstanding principal amount of the Notes, the Company has agreed to execute, and to cause the guarantors party to the Indentures to execute, and to use all reasonable efforts to cause the trustees under the Indentures to execute, supplemental indentures (the "Supplemental Indentures") in order to give effect to the amendments of the Indentures contemplated in the Notes Tender Offers documents; provided, however, that notwithstanding the fact that the Supplemental Indentures will become effective upon such execution, 22 25 the proposed amendments set forth therein (the "Proposed Amendments") will not become operative unless and until the Minimum Note Condition is satisfied or waived and all other conditions to the Notes Tender Offers set forth in Section 15 have been satisfied or waived by Parent and Parent accepts all Notes (and related consents) validly tendered for purchase and payment pursuant to the Notes Tender Offers. In such event, the parties to the Merger Agreement have agreed that the Proposed Amendments will be deemed operative as of immediately prior to such acceptance for payment, and Parent will thereafter be obligated to make all payments for the Notes (and related consents) so tendered. Directors. The Merger Agreement provides that upon the acceptance for payment of Shares pursuant to the Offer, as a result of which Parent or the Purchaser beneficially own at least a majority of the outstanding Shares, Parent shall be entitled to designate such number of directors, rounded up to the next whole number, on the Company Board that equals the product of (1) the total number of directors on the Company Board (giving effect to the directors designated by Parent pursuant to this sentence) and (2) the percentage that the number of Shares so purchased bears to the total number of Shares then outstanding. In furtherance thereof, the Company will, upon request of the Purchaser, use its best efforts promptly either to increase the size of the Company Board or to secure the resignations of such number of directors, or both, as is necessary to enable Parent's designees to be elected to the Company Board and will cause Parent's designees to be elected; provided, however, that until the Effective Time there will be at least two members of the Company Board who are directors as of the date of the Merger Agreement and are not employees of the Company ("Independent Directors"). If the number of Independent Directors is reduced below two for any reason whatsoever, any remaining Independent Directors (or Independent Director) shall be entitled to designate persons to fill the vacancies who will be deemed to be Independent Directors for purposes of the Merger Agreement or, if no Independent Director then remains, the other directors will designate two persons to fill the vacancies who may not be stockholders, affiliates, associates or employees of Parent or the Purchaser, and such persons will be deemed to be Independent Directors for purposes of the Merger Agreement. In the event that Parent's designees constitute a majority of the directors on the Company Board, the affirmative vote of a majority of the Independent Directors will be required after the acceptance for payment of Shares pursuant to the Offer and prior to the Effective Time, to (1) amend or terminate the Merger Agreement by the Company, (2) cause the Company to extend or waive the time for the performance of any of the obligations or other acts of Parent or the Purchaser under the Merger Agreement, (3) waive any of the Company's rights under the Merger Agreement, or (4) take any other action under or in connection with the Merger Agreement if such action materially and adversely affects holders of Shares other than Parent or the Purchaser; provided, that if, notwithstanding reasonable efforts set forth above to ensure that at least two directors are Independent Directors, there are no Independent Directors, such actions (except for any amendments, modification or waiver of Sections 2.3 or 8.1 of the Merger Agreement) may be effected by unanimous vote of the entire Company Board. The Merger. The Merger Agreement provides that as soon as practicable after the satisfaction or waiver of each of the conditions to the Merger set forth therein, at the Effective Time the Purchaser will be merged with and into the Company. Following the Merger, the separate existence of the Purchaser will cease, and the Company will continue as the Surviving Corporation, indirectly wholly-owned by Parent. If required by the DGCL, the Company shall call and hold a meeting of its shareholders (the "Company Shareholders' Meeting") promptly following consummation of the Offer for the purpose of voting upon the approval of the Merger Agreement. At any such meeting all outstanding Shares then owned by Parent or the Purchaser or any subsidiary of Parent will be voted in favor of approval of the Merger. Pursuant to the Merger Agreement, each Share outstanding immediately before the Effective Time (other than Shares owned beneficially or of record by Parent or any subsidiary of Parent or held in the treasury of the Company, all of which will be canceled, and other than Shares that are held by shareholders, if any, who properly exercise their appraisal rights under the DGCL) will be converted into the right to receive the Merger Consideration except as described below. Shareholders who perfect their right to appraisal of their Shares under the DGCL shall be entitled to the amounts determined pursuant to such proceedings. See Section 12. 23 26 To the extent any of the Company Redeemable Exchangeable Warrants (the "Warrants") remain unexercised as of the Effective Time, these Warrants will be exercisable only for that amount of cash that is paid and issued to the Trustee (designated pursuant to the Trust Agreement between the Company and The Bank of New York, as successor trustee to Harris Trust and Savings Bank) in payment for the Shares held by the Trustee immediately theretofore obtainable upon exercise of such Warrants. Representations and Warranties. The Merger Agreement contains customary representations and warranties of the parties thereto, including representations by the Company as to its corporate existence and power, capitalization, corporate authorizations, subsidiaries, required stockholder vote, SEC filings, financial statements, absence of undisclosed liabilities, books and records, inventory, absence of certain changes (including any events having a material adverse effect on the condition (financial or otherwise), business, assets, liabilities, prospects or results of operations of the Company and its subsidiaries taken as a whole, excluding effects from general economic conditions, general securities market conditions or conditions affecting the Company's industry generally), government authorizations, absence of litigation, compliance with laws, employee matters, labor matters, environmental matters, taxes, intellectual property, state takeover laws, material contracts, customers and suppliers, regulation as a utility, qualifying facility, title to properties, the opinion of the Company's financial advisor, interests of officers and directors and insurance. Covenants. The Merger Agreement contains various customary covenants of the parties thereto. A description of certain of these covenants follows: Company Conduct of Business Covenants. The Company agrees that, prior to the earlier of (i) the Effective Time and (ii) the time the directors designated by Parent have been elected to, and shall constitute a majority of, the Company Board pursuant to the Merger Agreement, and except as may be agreed in writing by Parent, or as expressly permitted by the Merger Agreement: (a) the Company will, and will cause its subsidiaries to, carry on its business in the usual, regular and ordinary course in substantially the same manner as previously conducted and will use its reasonable efforts to (a) preserve intact its business organization and goodwill, (b) retain its current officers and other employees and (c) preserve its current relationships with customers, suppliers, distributors and others having significant business dealings with the Company; (b) neither the Company nor any of its subsidiaries will: (1) (i) amend its Certificate of Incorporation or By-laws or similar organizational document, (ii) issue, deliver, sell, pledge or otherwise encumber any shares of its capital stock, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities (other than the issuance of Shares (1) upon the exercise of stock options outstanding on the date of the Merger Agreement, (2) upon the exercise of Company warrants outstanding on the date of the Merger Agreement or (3) pursuant to the Rights Agreement), (iii) declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock, (iv) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, or (v) purchase, redeem or otherwise acquire any shares of capital stock of the Company or any of its subsidiaries or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities; (2) (i) incur or modify any indebtedness or other liability, other than in the ordinary and usual course of business and consistent with past practice; or (ii) modify, amend or terminate any of its material contracts or waive, release or assign any material rights or claims, except in the ordinary course of business and consistent with past practice; (3) (i) incur or assume any indebtedness (either long-term or short-term), except indebtedness under the Company's revolving credit facilities that when added to all other outstanding indebtedness of the Company (as shown on Exhibit B to the Merger Agreement, which shall be updated and delivered to Parent from time to time pursuant to a request of 24 27 Parent) shall not exceed $985 million at any time prior to the Appointment Date, provided, that in no event shall any such indebtedness be used to purchase or repay any of the Notes (other than scheduled interest payments thereon); (ii) modify the terms of any indebtedness or other liability unless agreed to in writing by Parent (which agreement shall not be unreasonably withheld or delayed); (iii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person, except as described in the disclosure schedule delivered by the Company and which are in the ordinary course of business and consistent with past practice; (iv) make any loans, advances or capital contributions to, or investments in, any other person (other than to or in wholly-owned subsidiaries of the Company), except in the ordinary course of business and consistent with past practice to employees for reasonable Company related expenses (e.g., reasonable travel advances and moving expenses); or (v) enter into any material commitment or transaction (including, but not limited to, any capital expenditure or purchase, sale or lease of assets or real estate), except capital expenditures no greater than $7 million in the aggregate between September 1, 2001, and December 31, 2001, and except for sales of inventory in the ordinary course of business and consistent with past practice; (4) transfer, lease, license, sell, mortgage, pledge, dispose of, or encumber any assets other than in the ordinary and usual course of business and consistent with past practice; (5) except as shall be required by any applicable employment agreement or collective bargaining agreement in effect on the date of the Merger Agreement and set forth in the disclosure schedule delivered by the Company, make any change in the compensation payable or to become payable to any of its officers, directors, employees, agents or consultants (other than normal recurring increases in wages to employees who are not officers or directors or affiliates in the ordinary course of business consistent with past practice) or to persons providing management services, or enter into or amend any employment, severance, consulting, termination or other agreement or employee benefit plan or make any loans to any of its officers, directors, employees (except as permitted in Section 6.1(d) of the Merger Agreement), affiliates, agents or consultants or make any change in its existing borrowing or lending arrangements for or on behalf of any of such persons pursuant to an employee benefit plan or otherwise; (6) (i) pay or make any accrual or arrangement for payment of any pension, retirement allowance or other employee benefit pursuant to any existing plan, agreement or arrangement to any officer, director, employee or affiliate or pay or agree to pay or make any accrual or arrangement for payment to any officers, directors, employees or affiliates of the Company of any amount relating to unused vacation days, except payments and accruals made in the ordinary course of business consistent with past practice; (ii) adopt or pay, grant, issue, accelerate or accrue salary or other payments or benefits pursuant to any pension, profit-sharing, bonus, extra compensation, incentive, deferred compensation, stock purchase, stock option, stock appreciation right, group insurance, severance pay, retirement or other employee benefit plan, agreement or arrangement, or any employment or consulting agreement with or for the benefit of any director, officer, employee, agent or consultant, whether past or present (for the avoidance of doubt, the requirements of this clause (ii) shall not prevent the Company from making ordinary payments of salary and fulfilling contractual obligations existing on the date hereof); or (iii) amend in any material respect any such existing plan, agreement or arrangement in a manner inconsistent with the foregoing; (7) permit any insurance policy naming it as a beneficiary or a loss payable payee to be canceled or terminated without notice to Parent, except policies providing coverage for losses not in excess of $100,000; (8) enter into any contract or transaction relating to the purchase of assets other than in the ordinary course of business consistent with prior practices; 25 28 (9) pay, repurchase, discharge or satisfy any of its claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction in the ordinary course of business and consistent with past practice, of claims, liabilities or obligations reflected or reserved against in, or contemplated by, the consolidated financial statements (or the notes thereto) of the Company and its consolidated subsidiaries; (10) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any of its subsidiaries (other than the Merger); (11) (i) change any of the accounting methods used by it unless required by GAAP, the Code or Regulation S-X promulgated under the Exchange Act or (ii) make any material election relating to taxes, change any material election relating to taxes already made, adopt any material accounting method relating to taxes, change any material accounting method relating to taxes unless required by GAAP or the Code, enter into any closing agreement relating to taxes, settle any claim or assessment relating to taxes or consent to any claim or assessment relating to taxes or any waiver of the statute of limitations for any such claim or assessment; (12) take, or agree to commit to take, any action that would or is reasonably likely to result in any of the conditions to the Offer set forth in Annex I to the Merger Agreement or any of the conditions to the Merger set forth in Article IX of the Merger Agreement not being satisfied, or that would make any representation or warranty of the Company contained in the Merger Agreement inaccurate in any respect at, or as of any time prior to, the Effective Time, or that would materially impair the ability of the Company, Parent, the Purchaser or the holders of Shares to consummate the Offer or the Merger in accordance with the terms of the Merger Agreement or materially delay such consummation; (13) plan, announce, implement or effect any material reduction in labor force, lay-off, early retirement program, severance program or other program or effort concerning the termination of employment of employees of the Company or its subsidiaries; (14) enter into an agreement, contract, commitment or arrangement to do any of the foregoing, or to authorize, recommend, propose or announce an intention to do any of the foregoing; and (c) the Company shall take all reasonable actions to obtain judicial approval of the Settlement Agreement (as defined in the Merger Agreement). Parent Covenant with Respect to the Purchaser. Parent agrees that it will take all action necessary to cause the Purchaser to perform its obligations under the Merger Agreement (including ensuring that the Purchaser will at the appropriate times have sufficient funds to consummate the Offer and the Merger) and to consummate the Offer, the Notes Tender Offers and the Merger on the terms and conditions set forth in the Merger Agreement. Company Stockholders Meeting; Company Proxy Statement. The Merger Agreement provides that, if approval of the Company's stockholders is required by applicable law in order to consummate the Merger other than pursuant to Section 253 of the DGCL, the Company shall as promptly as practicable following the acceptance of Shares pursuant to the Offer (1) duly call, give notice of, convene and hold a meeting of its stockholders (the "Company Stockholders Meeting") for the purpose of considering and taking action upon the Merger Agreement and the Merger; and (2) prepare and file with the SEC a proxy statement. Once the Company Stockholders Meeting has been called and noticed, the Company shall not postpone or adjourn the Company Stockholders Meeting (other than for the absence of a quorum) without the consent of Parent. In the event that the Purchaser acquires, in the aggregate, at least 90% of the outstanding Shares in the Offer, or otherwise, Parent, the Purchaser and the Company shall take all necessary actions to cause 26 29 the Merger to be come effective, as soon as practicable after the expiration of the Offer, without a meeting of stockholders of the Company, in accordance with Section 253 of the DGCL. Access; Confidentiality. The Company agrees that, subject to applicable law and upon reasonable request, the Company shall, and shall cause each of its subsidiaries to, afford to Parent, and to its officers, employees, accountants, counsel, financial advisers and other representatives, full access during normal business hours during the period prior to the Effective Time to all their respective properties, books, contracts, commitments, personnel (including for the purpose of interviewing such personnel in connection with the integration process) and records and their accountants' work papers and, during such period, the Company shall, and shall cause each of its subsidiaries to, furnish promptly to Parent (1) a copy of each report, schedule, registration statement and other document filed by it during such period pursuant to the requirements of Federal or state securities laws, (2) a copy of each material tax return, report and information statement filed by it during such period, and (3) all other information concerning its business, assets, properties and personnel as Parent may reasonably request. Employee Stock Options and Benefit Plans. The Merger Agreement contains several provisions that address existing option plans, options outstanding under those plans and benefit plans. These provisions are described in detail under "Employee Stock Options" and "Employee Benefit Arrangements" in Section 13. No Solicitation. The Merger Agreement provides that neither the Company nor any of its subsidiaries or affiliates shall (and the Company shall cause the officers, directors, employees, representatives and agents of the Company, each of its subsidiaries and each affiliate of the Company, including, but not limited to, investment bankers, attorneys and accountants, not to), directly or indirectly, encourage, solicit, participate in or initiate discussions or negotiations with, or provide any information to, any person or group (other than Parent, any of its affiliates or representatives) concerning any Acquisition Proposal (defined below), except that nothing in the Merger Agreement shall prohibit the Company or the Company Board from (1) taking and disclosing to the Company's stockholders a position with respect to a tender or exchange offer by a third party pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act, or (2) making such disclosure to the Company's stockholders as, in the good faith judgment of the Board, after receiving advice from outside counsel, is required under applicable law, provided that the Company may not, except as permitted by Section 6.4(b) of the Merger Agreement, withdraw or modify, or propose to withdraw or modify, the recommendation of the Company's Board of Directors that the stockholders of the Company accept the Offer, tender their Shares to the Purchaser and approve and adopt the Merger Agreement and the Merger (the "Recommendations") or its position with respect to the Offer or the Merger or approve or recommend, or propose to approve or recommend any Acquisition Proposal, or enter into any agreement with respect to any Acquisition Proposal. The Company has agreed to immediately cease any existing activities, discussions or negotiations with any parties previously conducted with respect to any of the foregoing. Notwithstanding the foregoing, prior to the time of acceptance of Shares for payment pursuant to the Offer, the Company may furnish information concerning its business, properties or assets to any corporation, partnership, person or other entity or group pursuant to appropriate confidentiality agreements, and may negotiate and participate in discussions and negotiations with such entity or group concerning an Acquisition Proposal if: (x) such entity or group has on an unsolicited basis submitted a bona fide written proposal to the Company Board relating to any such transaction which the Company Board determines in good faith, represents a superior transaction to the transactions contemplated by the Merger Agreement and which is not subject to the receipt of any necessary financing; and (y) in the opinion of the Company Board such action is required to discharge the Company Board's fiduciary duties under applicable law, determined only after receipt of: (i) advice from the Company's investment banking firm that the Acquisition Proposal is superior, from a financial point of view, to the Offer and the Merger (which advice may include analysis of the enterprise value if the Company's Board has been advised by independent legal counsel that its fiduciary duties requires them to do so), and 27 30 (ii) advice from independent legal counsel to the Company that the failure to provide such information or access or to engage in such discussions or negotiations would cause the Company Board to violate its fiduciary duties under applicable law. The Company has agreed to promptly, but in any event within one business day, notify Parent of the existence of any proposal, discussion, negotiation or inquiry received by the Company, and the Company has agreed to promptly, but in any event within one business day, communicate to Parent the terms of any proposal, discussion, negotiation or inquiry which it may receive (and to immediately provide to Parent copies of any written materials received by the Company in connection with such proposal, discussion, negotiation or inquiry) and the identity of the party making such proposal or inquiry or engaging in such discussion or negotiation. The Company has agreed to promptly provide to Parent any non-public information concerning the Company provided to any other party which was not previously provided to Parent. The Merger Agreement also provides that neither the Company Board nor any committee thereof shall (1) withdraw or modify, or propose to withdraw or modify, in a manner adverse to Parent or the Purchaser, the Recommendations or the approval by the Company Board or any such committee of the Offer, the Merger Agreement or the Merger, (2) approve or recommend or propose to approve or recommend, any Acquisition Proposal or (3) enter into any agreement with respect to any Acquisition Proposal. Notwithstanding the foregoing, prior to the time of acceptance for payment of Shares pursuant to the Offer, the Company Board may withdraw or modify its approval or recommendation of the Offer, the Merger Agreement or the Merger, approve or recommend a Superior Proposal (as defined below), or enter into an agreement with respect to a Superior Proposal, in each case at any time after the fifth business day following Parent's receipt of written notice from the Company advising Parent that the Company Board has received a Superior Proposal which it intends to accept, specifying the material terms and conditions of such Superior Proposal, identifying the person making such Superior Proposal, but only if the Company shall have caused its financial and legal advisors to negotiate with Parent to make such adjustments in the terms and conditions of the Merger Agreement as would enable the Company to proceed with the transactions contemplated therein on such adjusted terms. The Merger Agreement defines "Acquisition Proposal" to mean any proposal or offer to acquire all or a substantial part of the business or properties of the Company or any of its subsidiaries or 15% or more of any capital stock of the Company or any of its subsidiaries, whether by merger, tender offer, exchange offer, sale of assets or similar transactions involving the Company or any subsidiary, division or operating or principal business unit of the Company. "Superior Proposal" means an Acquisition Proposal which satisfies both subparagraph (x) and subparagraph (y) of the first paragraph of this section. Indemnification; Insurance. The Merger Agreement provides that from and after the Effective Time, the Surviving Corporation will indemnify and hold harmless (including the advancement of expenses to) each present and former director and officer of the Company and its wholly-owned subsidiaries and Gaylord Container de Mexico, S.A. de C.V. (the "Indemnified Parties") for claims made within six years following the Effective Time for acts or omissions occurring on or prior to the Effective Time to the extent provided in the Company's Certificate of Incorporation, By-Laws and indemnity agreements in effect on the date of the Merger Agreement; provided that such indemnification shall be subject to any limitation imposed from time to time under applicable law. The Merger Agreement further provides that, for not less than four years from the Effective Time, Parent shall cause to be maintained, at Parent's election, either (1) the Company's current directors' and officers' insurance and indemnification policy to the extent it provides coverage for events occurring prior to the Effective Time for all Indemnified Parties, (2) a new policy providing substantially similar coverage, or (3) a "tail" policy on the Company's existing directors and officers insurance and indemnification policy, so long as the annual premiums do not exceed 150% of the amount per annum paid by the Company in its last full fiscal year, or to obtain as much insurance as can be obtained for the amount of such premiums. 28 31 Conditions to the Merger. The obligations of Parent, the Purchaser and the Company to consummate the Merger are subject to the satisfaction of the following conditions at or prior to the Effective Time: (1) if required by the DGCL, the approval of the Merger Agreement and the Merger by the stockholders of the Company in accordance with such law; (2) the Purchaser shall have purchased all Shares validly tendered and not withdrawn pursuant to the Offer; (3) the applicable waiting period under the HSR Act and any applicable foreign antitrust or competition laws and regulations shall have expired or been terminated; and (4) no judgment, order, decree, statute, law, ordinance, rule or regulation, entered, enacted, promulgated, enforced or issued by any court or other governmental entity of competent jurisdiction or other legal restraint or prohibition shall be in effect preventing or prohibiting consummation of the Merger. Termination. The Merger Agreement may be terminated at any time prior to the Effective Time: (1) by the mutual written consent of the Company and Parent; (2) by either Parent or the Company if (a) (i) the Offer shall have been terminated or expired without any Shares being purchased pursuant thereto, or (ii) the Purchaser has not accepted for payment any Shares pursuant to the Offer by December 28, 2001, so long as the terminating party is not the cause of the failure of the Offer; (b) any governmental entity shall have issued an order, decree or ruling or taken any other action (which order, decree, ruling or other action the parties to the Merger Agreement shall use their reasonable efforts to lift), which permanently restrains, enjoins or otherwise prohibits the acceptance for payment of, or payment for, Shares pursuant to the Offer or the Merger and such order, decree, ruling or other action shall have become final and non-appealable; (3) by the Company (i) in connection with entering into a definitive agreement as permitted by the "No Solicitation" section discussed above, provided the Company has complied with all provisions of such section, including the notice provisions, and that the Company makes simultaneous payment to Parent of the termination fee described below, or (ii) if Parent or the Purchaser shall have breached in any material respect any of their respective representations, warranties, covenants or other agreements contained in the Merger Agreement, which breach cannot be or has not been cured, in all material respects, within 10 days after the giving of written notice of such breach to Parent or the Purchaser, as applicable. (4) by Parent (i) if prior to the purchase of Shares by the Purchaser pursuant to the Offer, the Company Board shall have withdrawn, modified or changed in a manner adverse to Parent or the Purchaser the Recommendations or its approval of the Offer, the Merger Agreement or the Merger or shall have recommended an Acquisition Proposal or shall have executed an agreement in principle or definitive agreement relating to an Acquisition Proposal or similar business combination with a person or entity other than Parent, the Purchaser or their affiliates; (ii) if prior to the purchase of Shares pursuant to the Offer, the Company shall have breached any representation, warranty, covenant or other agreement contained in the Merger Agreement which would give rise to the failure of a condition to the Offer described in subsections (f) and (g) of Annex I thereof; (iii) the Offer is not commenced within 5 business days after the first public announcement of the Merger Agreement because of the failure of any of the conditions set forth in Annex I thereof being satisfied; or (iv) there is a failure to satisfy the condition set forth in clause (j) of Annex I to the Merger Agreement within 20 business days following commencement of the Offer. If the Merger Agreement is terminated, there shall be no other liability on the part of Parent, the Purchaser or the Company except liability for fraud or willful breach of the Merger Agreement prior to the termination thereof and except for fees payable in connection with termination. 29 32 Fees and Expenses. Except as otherwise specified below, all costs and expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby will be paid by the party incurring such expenses. In the event that (1) the Company terminates the Merger Agreement as described in subsection 3(i) above under "Termination" or (2)(x) either the Company or Parent terminates or abandons the transactions as described in subsection 2(a) above under "Termination" and prior thereto there shall have been publicly announced another Acquisition Proposal; or (y) Parent terminates or abandons the transactions as described in subsection 4(i) or (ii) above under "Termination"; then the Company shall immediately pay Parent a fee equal to $20 million (the "Termination Fee") plus an amount equal to the actual and reasonably documented out-of-pocket fees and expenses incurred by Parent and the Purchaser in connection with the Offer, the Notes Tender Offers, the Merger, the Merger Agreement, and the consummation of the transactions contemplated thereby up to a maximum amount of $2.5 million in the aggregate (the "Expense Reimbursement"). The Merger Agreement provides that the Termination Fee and Expense Reimbursement shall be paid in same day funds concurrently with the execution of an agreement referred to in subsection 3(i) above under "Termination" or in the case of clause (2) of this paragraph no later than the date of consummation of any Acquisition Proposal within 12 months of the termination of the Merger Agreement; provided, however, if an Acquisition Proposal is not consummated within 12 months of the termination of the Merger Agreement, no such payments required by clause (2) above shall be required to be paid. The Merger Agreement provides that no Termination Fee or Expense Reimbursement shall be payable if Parent or the Purchaser is in material breach of its representations, warranties or obligations under the Merger Agreement at the time its right to terminate the Merger Agreement accrued. Amendment. Prior to the closing date of the Merger, the Merger Agreement may be amended by written agreement of the parties thereto, by action taken by their respective Boards of Directors; provided, that after adoption of the Merger Agreement by stockholders of the Company, there shall be no amendment to the Merger Agreement that would reduce the amount or change the form of consideration into which each Share shall be converted upon consummation of the Merger. Stockholders Agreement The following is a summary of the material provisions of the Stockholders Agreement (the "Stockholders Agreement"), dated as of September 27, 2001, by and among Parent, the Purchaser and certain stockholders of the Company, a copy of which is filed as an exhibit to the Schedule TO. The summary is qualified in its entirety by reference to the Stockholders Agreement, which is incorporated by reference herein. As a condition and inducement to Parent and the Purchaser's entering into the Merger Agreement, certain stockholders of the Company (each a "Stockholder") who own an aggregate of 6,672,480 Shares (excluding Shares subject to options but including restricted stock that will vest immediately prior to or upon consummation of the Offer), representing approximately 11.9% of the Shares outstanding on September 26, 2001, concurrently with the execution and delivery of the Merger Agreement entered into the Stockholders Agreement. The Stockholders are each of the Company's directors, Michael J. Keough, Lawrence G. Rogna, Jeffery B. Park and Mid-America Group, Ltd., an affiliate of Marvin A. Pomerantz. Pursuant to the Stockholders Agreement, each of the Stockholders has agreed to validly tender into the Offer promptly all Shares subject to the Stockholders Agreement. Each Stockholder agreed not to withdraw his or her Shares so tendered unless the Offer is terminated or expired. Each of the Stockholders has granted Parent an irrevocable proxy with respect to the voting of such Shares in favor of the Merger and against any action or agreement which would impede, interfere with or prevent the Merger. Each of the Stockholders has agreed that, prior to the termination of the Stockholders Agreement pursuant to its terms, such Stockholder will not (1) transfer, or consent to the transfer, of any or all of the Shares beneficially owned by such Stockholder; (2) enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of the Shares beneficially owned by such 30 33 Stockholder or any interest therein; (3) grant any proxy, power-of-attorney or other authorization in or with respect to the Shares beneficially owned by such Stockholder; (4) deposit the Shares beneficially owned by such Stockholder into a voting trust or enter into a voting agreement or arrangement with respect to the Shares beneficially owned by such Stockholder or (5) take any other action that would in any way restrict, limit or interfere with the performance of such Stockholder's obligations under the Stockholders Agreement or the transactions contemplated thereby. The Stockholders Agreement, and all rights and obligations of the parties thereto, shall terminate immediately upon the earlier of (1) the termination of the Merger Agreement in accordance with its terms, (2) the Effective Time or (3) the written mutual consent of the parties thereto. Stock Option Agreement The following is a summary of the material provisions of the Stock Option Agreement (the "Option Agreement"), dated as of September 27, 2001, by and between Parent and the Company, a copy of which is filed as an exhibit to the Schedule TO. The summary is qualified in its entirety by reference to the Option Agreement, which is incorporated by reference herein. Pursuant to the Option Agreement, the Company granted to Parent an irrevocable option (the "Company Option") to purchase up to such number of newly-issued Shares of Company common stock (the "Company Option Shares") as is equal to 19.9% of the Shares outstanding on the date of exercise of the option at a purchase price per Share of $1.80, subject to the terms and conditions set forth in the Option Agreement. The Option Agreement provides that, at any time or from time to time prior to the termination of the Company Option in accordance with the terms of the Option Agreement, Parent (or its designee) may exercise the Company Option, in whole or in part, if on or after the date of the Option Agreement, the Purchaser accepts for payment pursuant to the Offer Shares constituting more than two-thirds but less than 90% of the Shares then outstanding on a fully diluted basis and the exercise of the Company Option would result in Parent and its affiliates holding 90% or more of the Shares outstanding on a fully diluted basis. Parent's obligation to purchase Shares and the Company's obligation to issue Shares upon any exercise of the Company Option is subject (at its election) to the conditions that (1) no preliminary or permanent injunction or other order against the purchase, issuance or delivery of the Shares issued by any federal, state or foreign court of competent jurisdiction shall be in effect (and no action or proceeding shall have been commenced or threatened for purposes of obtaining such an injunction or order) and (2) any applicable waiting period under the HSR Act and any foreign antitrust or competition laws and regulations shall have expired and (3) there shall have been no material breach of the representations, warranties, covenants or agreements of the other party contained in the Option Agreement or the Merger Agreement; provided, however, that any failure by Parent to purchase Shares, or any failure by the Company to issue Shares, upon exercise of the Company Option at any closing of such purchase as a result of the nonsatisfaction of any of such conditions shall not affect or prejudice Parent's right to purchase such Shares upon the subsequent satisfaction of such conditions. The Option Agreement shall terminate and the Company Option shall expire upon the earlier of (1) the Effective Time and (2) the termination of the Merger Agreement. 12. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY. Purpose of the Offer. The purpose of the Offer is to acquire control of, and the entire equity interest in, the Company. The purpose of the Merger is to acquire all outstanding Shares not tendered and purchased pursuant to the Offer. If the Offer is successful, the Purchaser intends to consummate the Merger as promptly as practicable. The Company Board has approved the Merger and adopted the Merger Agreement. Depending upon the number of Shares purchased by the Purchaser pursuant to the Offer, the Company Board may be 31 34 required to submit the Merger Agreement to the Company's stockholders for approval at a stockholder's meeting convened for that purpose in accordance with the DGCL. If stockholder approval is required, the Merger Agreement must be approved by two-thirds of all votes entitled to be cast at such meeting. If the Minimum Stock Condition is satisfied, the Purchaser will have sufficient voting power to approve the Merger Agreement at the stockholders' meeting without the affirmative vote of any other stockholder. If the Purchaser acquires at least 90% of the Shares pursuant to the Offer, the Merger may be consummated without a stockholders' meeting and without the approval of the Company's stockholders. The Merger Agreement provides that the Purchaser will be merged into the Company and that the certificate of incorporation and bylaws of the Purchaser will be the certificate of incorporation and bylaws of the Surviving Corporation following the Merger. Under the DGCL, holders of Shares do not have appraisal rights as a result of the Offer. In connection with the Merger, however, stockholders of the Company may have the right to dissent and demand appraisal of their Shares under the DGCL. Dissenting stockholders who comply with the applicable statutory procedures under the DGCL will be entitled to receive a judicial determination of the fair value of their Shares (exclusive of any element of value arising from the accomplishment or expectation of the Merger) and to receive payment of such fair value in cash. Any such judicial determination of the fair value of the Shares could be based upon considerations other than or in addition to the price per Share paid in the Merger and the market value of the Shares. 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. Stockholders should recognize that the value so determined could be higher or lower than the price per Share paid pursuant to the Offer or the consideration per Share to be paid in the Merger. Moreover, the Purchaser may argue in an appraisal proceeding that, for purposes of such a proceeding, the fair value of the Shares is less than the price paid in the Offer or the Merger. See Section 17. Plans for the Company. Pursuant to the terms of the Merger Agreement, promptly upon the purchase of and payment for any Shares by the Purchaser pursuant to the Offer, Parent currently intends to seek maximum representation on the Company Board, subject to the provision in the Merger Agreement that if Shares are purchased pursuant to the Offer, there shall be until the Effective Time at least two members of the Company Board who are directors as of the date of the Merger Agreement and not employees of the Company. Except as otherwise provided herein, it is expected that, initially following the Merger, the business and operations of the Company will, except as set forth in this Offer to Purchase, be continued substantially as they are currently being conducted. Parent will continue to evaluate the business and operations of the Company during the pendency of the Offer and after the consummation of the Offer and the Merger and will take such actions as it deems appropriate under the circumstances then existing. Parent intends to seek additional information about the Company during this period. Thereafter, Parent intends to review such information as part of a comprehensive review of the Company's business, operations, capitalization and management with a view to optimizing development of the Company's potential in conjunction with Parent's business. Except as described above or elsewhere in this Offer to Purchase, the Purchaser and Parent have no present plans or proposals that would relate to or result in (1) any extraordinary corporate transaction involving the Company or any of its respective subsidiaries (such as a merger, reorganization, liquidation, relocation of any operations or sale or other transfer of a material amount of assets), (2) any sale or transfer of a material amount of assets of the Company or any of its subsidiaries, (3) any material change in the Company's capitalization or dividend policy, or (4) any other material change in the Company's corporate structure or business. 32 35 13. CERTAIN EFFECTS OF THE OFFER. 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, which could adversely affect the liquidity and market value of the remaining Shares held by stockholders other than the Purchaser. The 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 such reduction would cause future market prices to be greater or less than the Offer Price. Stock Quotation. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the standards for continued listing on the American Stock Exchange. According to the American Stock Exchange's published guidelines, the American Stock Exchange would consider delisting the Shares if any one or more of the following conditions should exist: (1) the number of Shares publicly held is less than 200,000; (2) the total number of public shareholders is less than 300; or (3) the aggregate market value of publicly held Shares is less than $1 million. According to representations made by the Company in the Merger Agreement, as of September 26, 2001, there were 55,971,493 Shares issued and outstanding. Based upon information available to Parent, as of the date of the Offer there are approximately 545 record holders of Shares. If, as a result of the purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet the requirements of the American Stock Exchange for continued listing and the listing of the Shares is discontinued, the market for the Shares could be adversely affected. If the American Stock Exchange were to delist the Shares, it is possible that the Shares would continue to trade on another securities exchange or in the over-the-counter market and that price or other quotations would be reported by such exchange or through other sources. The extent of the public market for such Shares and the availability of such quotations would depend, however, upon such factors as the number of stockholders and/or the aggregate market value of such securities remaining at such time, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration under the Exchange Act as described below and other factors. Margin Regulations. 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 the collateral of the Shares. Depending upon factors similar to those described above regarding the market for the Shares and stock quotations, it is possible that, following the Offer, the Shares would no longer constitute "margin securities" for the purposes of the margin regulations of the Federal Reserve Board and therefore could no longer be used as collateral for loans made by brokers. 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 the Shares are neither listed on a national securities exchange nor held by 300 or more holders of record. Termination of 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 provisions of the Exchange Act no longer applicable to the Company, such as the short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the requirement of furnishing a proxy statement pursuant to Section 14(a) of the Exchange Act in connection with stockholders' meetings and the related requirement of furnishing an annual report to stockholders and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions. Furthermore, 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 eliminated. If registration of the Shares under the Exchange Act were terminated, the Shares would no longer be "margin securities" or be eligible for inclusion on the American Stock Exchange. Parent and the Purchaser currently intend to seek to cause the Company to terminate the registration of the Shares under the Exchange Act as soon after consummation of the Offer as the requirements for termination of registration are met. 33 36 Employee Stock Options. The Merger Agreement provides that prior to consummation of the Offer, the Company shall take all necessary action to: (1) terminate, effective not later than the Effective Time, all of the Option Plans (as defined in the Merger Agreement), (2) cancel, effective not later than the Effective Time, each option to purchase shares of Company Common Stock granted under the Gaylord Container Corporation 1997 Long-Term Equity Incentive Plan and the Gaylord Container Corporation Outside Director Stock Option Plan, that is outstanding and unexercised as of such time, (3) cancel, effective not later than the Effective Time, each outstanding option to purchase shares of Company Common Stock granted under all Option Plans held by certain senior officers of the Company, including Messrs. Casey, Keough and Rogna, that is outstanding and unexercised as of such time, and (4) use its commercially reasonable efforts to obtain consents of the individual holders to cancel, effective not later than the Effective Time, each outstanding option to purchase shares of Company Common Stock granted under all Option Plans that is outstanding and unexercised as of such time and that is not otherwise canceled pursuant to the foregoing clauses (2) and (3) (it being understood that the failure of the Company to obtain the consent of any such holder, after a good faith effort, shall not be deemed a breach of such clause (4)). The Company also agrees to take all action reasonably necessary to approve the disposition of the Company Options and other awards so as to exempt such dispositions under Rule 16b-3 of the Exchange Act. Employee Benefit Arrangements. The Merger Agreement provides that during the period commencing on the Effective Time and ending on the first anniversary thereof, Parent shall cause the Surviving Corporation to provide employees of the Company and the Company's subsidiaries who were employees of the Company or the Company's subsidiaries immediately before the Effective Time employee benefits that are substantially no less favorable in the aggregate than either those currently provided by the Company and the Company's subsidiaries to such employees as of the date of the Merger Agreement or those provided from time to time by Parent and its subsidiaries to their other similarly situated employees; provided, however, that, during such one-year period, the benefit provided to any such employee under any tax-qualified defined benefit pension plan in which the employee participates shall be no less than that determined under the formula in effect under the Gaylord Container Retirement Plan as in effect on the date of the Merger Agreement taking into account both (1) the years of service recognized for such employee under such Retirement Plan as of the closing date of the Merger and (2) such employee's service with Parent, the Surviving Corporation, or any Subsidiary of Parent after the closing date of the Merger during such one-year period; provided, further, that the provisions of the Merger Agreement described in this section "Employee Benefit Arrangements" will not restrict Parent's or the Surviving Corporation's ability to change any benefit plans in the future. The Merger Agreement also provides that, to the extent that any benefit would become payable in respect of consummation of the Offer, under any Benefit Plan (as defined in the Merger Agreement) required to be disclosed in Section 4.12(m) of the company disclosure schedule delivered by the Company pursuant to the Merger Agreement, the Company shall, prior to the initial expiration of the Offer, take all actions necessary: (1) to the extent it may unilaterally do so, to amend all such Benefit Plans to provide that any benefit that would have been required to be paid in respect of the Offer will instead become payable in respect of the Merger, (2) to the extent not amended under the preceding clause (1), to amend all of its Benefit Plans with respect to certain senior executives and others such that any benefit that would have been required to be paid in respect of the Offer will instead become payable in respect of the Merger, (3) to amend the Company's Supplemental Executive Retirement Plan and the phantom stock grants to the extent such Benefit Plans apply to any individuals other than the senior executives and other individuals referenced above, such that any benefit that would have been required to be paid in respect of the Offer will instead become payable in respect of the Merger, but, with respect to the Supplemental Executive Retirement Plan, providing such individuals with a payment for the time value of money in respect of the period between the Offer and the Merger using a discount rate based on U.S. treasuries with the most comparable maturities such that no benefit under that plan has been reduced (provided that nothing in the Merger Agreement shall prohibit the Company from continuing to make periodic payments under and in accordance with the Supplemental Executive Retirement Plan to any specified individual who is receiving such periodic payments as of the date of the Merger Agreement until 34 37 such time as such individual's benefit is paid out in full by reason of the consummation of the Merger), and (4) to use commercially reasonable efforts to obtain the consent of each affected individual to amend the Company's Management Incentive Plan and each individual Severance Compensation Agreement (as amended) with respect to such individual, to the extent it applies to any individuals other than the senior executives and other individuals referenced above, such that any benefit that otherwise would have been required to be paid in respect of the Offer will instead become payable in respect of the Merger (it being understood that the failure to obtain the consent of any such beneficiary, after a good faith effort, shall not be deemed a breach of this clause (4)). After the Appointment Date (as defined in the Merger Agreement) and prior to the Effective Date, Parent agrees not to, and to cause the Company not to, terminate the employment of certain senior officers of the Company, including Messrs. Pomerantz, Casey, Keough and Rogna, or any individual who consents to the amendment described in clause (4) above. The Merger Agreement also provides that from and after the Effective Time, the Surviving Corporation and its wholly-owned subsidiaries, as applicable, shall honor each Benefit Plan that provides for severance (including without limitation change of control and termination agreements) in accordance with its terms (as amended in accordance with the second paragraph of this section "Employee Benefit Arrangements", if applicable); provided that the provisions of the Merger Agreement described in this paragraph will not prevent Parent or the Surviving Corporation from causing such benefit to be amended or terminated in accordance with its terms. The Merger Agreement provides that for purposes of any employee benefit plan or arrangement maintained by Parent, the Surviving Corporation or any subsidiary of Parent, Parent shall recognize (or cause to be recognized) service with the Company and the Company's subsidiaries and any predecessor entities (and any other service credited by the Company under similar benefit plans) for purposes of vesting and eligibility to participate; provided that the retirement benefit shall be calculated as provided in the first paragraph of this section "Employee Benefit Arrangements". Pomerantz Employment Agreement. The Company currently has an employment agreement with Marvin A. Pomerantz, Chairman and Chief Executive Officer of the Company. The agreement, originally memorialized by a written agreement dated June 1, 1997, as amended March 1, 2000, was set to expire in December 2000, but it has been extended by oral agreement between Mr. Pomerantz and the Company through December 31, 2001. The agreement provides that if Mr. Pomerantz's employment is terminated (for any reason other than death, disability or serious misconduct) or if Mr. Pomerantz resigns for good reason, he will be entitled to receive his current base salary ($900,000 per annum) through the term of his employment agreement (December 31, 2001). The employment agreement also provides for supplemental retirement payments equal to 50% of his average base salary and bonus for the four highest years of service, less primary Social Security benefits and any amounts payable under the Company's retirement plan. In the event of a change in control of the Company, Mr. Pomerantz is entitled to receive a lump sum payment equal to the actuarial equivalent (on an after-tax basis) of the supplemental retirement payments he would be entitled to receive had he retired on the date of the change in control. The purchase by Parent and the Purchaser of Shares in the Offer would constitute a change in control under his employment agreement. However, as explained above in the section "Employee Benefit Arrangements," the Company and Mr. Pomerantz have agreed to amend his employment agreement so that any benefit that would be paid to Mr. Pomerantz as a result of the consummation of the Offer will instead become payable upon consummation of the Merger. Mr. Pomerantz's lump sum payment upon consummation of the Merger will be approximately $8.0 million. Severance Agreements; Management Incentive Plan Payments. The Company currently has Severance Compensation Agreements (each, a "Severance Agreement") with 63 executives, including Daniel P. Casey (Vice Chairman and Chief Financial Officer), Michael J. Keough (President and Chief Operating Officer) and Lawrence G. Rogna (Senior Vice President), but excluding Mr. Pomerantz. Each Severance Agreement provides that if the employment of the executive is terminated (other than by reason of death, disability, retirement, cause or voluntary resignation) within 24 months after a change in control of the Company, the executive will receive (1) a severance payment equal to two times (or three times in the case of Messrs. Casey, Keough and Rogna) the sum of the executive's annual base salary plus the 35 38 executive's target bonus under the Company's Management Incentive Plan and (2) certain other benefits for two years (or three years in the case of Messrs. Casey, Keough and Rogna) including, without limitation, continued life, medical, dental, disability and accident insurance and outplacement services. The consummation of the Offer would constitute a change in control under each Severance Agreement. However, as explained above in the section "Employee Benefit Arrangements," the Company and certain senior executives, (including Messrs. Casey, Keough and Rogna) have agreed to amend the Severance Agreements so that any benefit that would be paid to the executives as a result of the consummation of the Offer will instead become payable upon consummation of the Merger, and the Company has agreed to use commercially reasonable efforts to cause all other Severance Agreements to be amended in this same way. If all of these executives were terminated within 24 months after a change in control, the aggregate amount of severance payments under the Severance Agreements would be approximately $27.3 million, of which Messrs. Casey, Keough and Rogna would receive approximately $1.9 million, $1.7 million and $1.2 million, respectively. The Company currently maintains a Management Incentive Plan which provides for variable compensation based upon achievement of certain earnings before interest, income taxes, depreciation and amortization ("EBITDA") targets by the Company under which 39 executives participate. Each Severance Agreement provides that, in the event of a change in control of the Company (as described in the preceding paragraph of this section "Severance Agreements; Management Incentive Plan Payments"), the Company's Management Incentive Plan will be terminated and pro-rata payments will be made to the executives as follows: (1) a projection of EBITDA for the fiscal year shall be established by the Board, (2) the projected EBITDA will create a pool of award monies based on the current formula of 1.6%, (3) the pool shall be pro-rated based on the number of weeks of the fiscal year completed at the date of termination of the Company's Management Incentive Plan and (4) the pool shall be distributed to all participating executives on the payroll as of the termination date of the Company's Management Incentive Plan in proportion to each executive's target incentive. Since the Company's current fiscal year ends on September 30, 2001, each executive will be entitled to receive incentive payments due under the Management Incentive Plan in the normal course for fiscal 2001 in addition to the pro rata change in control payments, if any, due with respect to the portion of fiscal 2002 completed at the date of termination of the Management Incentive Plan. The Company will establish the forecasted EBITDA used to determine the amount of these pro rata change in control payments based on actual EBITDA used to calculate payments for fiscal 2001. Employment Letter Agreements. The Company currently has letter agreements with Messrs. Casey, Keough and Rogna and four other executives which provide that upon completion of the two years (or three years in the case of Messrs. Casey, Keough and Rogna) of benefits coverage provided under the Severance Agreements, such executive may elect to continue medical and dental coverage indefinitely by paying the full premium incurred by the successor for the coverage selected. Promissory Notes. The Company made loans to seven executives that are each party to a Severance Agreement in order to facilitate certain relocations. Each of these executives (who do not include any of Messrs. Pomerantz, Casey, Keough or Rogna) executed a promissory note in favor of the Company. If an executive becomes entitled to receive a severance payment under his Severance Agreement, the Company will forgive all principal and accrued interest owing under his promissory note. The aggregate original principal amount of these promissory notes was $555,000. Supplemental Executive Retirement Plan. The Company's Supplemental Executive Retirement Plan ("SERP") covering Messrs. Casey, Rogna and Keough and five other current or former executives (including Dale E. Stahl, an employee of Parent and former employee of the Company) provides for supplemental retirement payments of up to 60% of their average base salary and bonus for the four highest of the last 10 years prior to retirement, less primary Social Security benefits and any amounts payable under the Company's retirement plan. Supplemental payments range from 35% (at age 55) to 60% (at age 65) of average base salary and bonus. In the event of a change in control of the Company, the executives will be entitled to receive in a lump sum the actuarial equivalent (on an after-tax basis) of the supplemental retirement payments. The lump sum payment payable upon a change in control to an 36 39 executive who has not attained age 55 will be calculated as if such executive had attained such age. The consummation of the Offer would constitute a change in control under the SERP. However, as explained above in the section "Employee Benefit Arrangements," the Company has agreed to amend the SERP generally to provide that benefits will become payable under the SERP on account of consummation of the Merger and not consummation of the Offer. The aggregate amount of lump sum SERP payments payable to these eight current or former executives upon consummation of the Merger will be approximately $15.4 million, of which Messrs. Casey, Keough, Rogna and Stahl would receive approximately $3.6 million, $1.8 million, $2.2 million and $3.3 million, respectively. Hayford Retirement Payments. In the event of a change in control of the Company, Warren J. Hayford, a director of the Company, will be entitled to receive in a lump sum the actuarial equivalent (on an after-tax basis) of the supplemental retirement payments he is currently receiving under his prior employment agreement with the Company. The consummation of the Offer would constitute a change in control under this arrangement. However, as explained above in the section "Employee Benefit Arrangements," the Company and Mr. Hayford have agreed to amend his prior employment agreement so that any benefit that would be paid to Mr. Hayford as a result of the consummation of the Offer will instead become payable upon consummation of the Merger. Mr. Hayford's lump sum payment upon consummation of the Merger will be approximately $3.8 million. Excise Tax Reimbursements. In the event Messrs. Pomerantz or Hayford or any executive covered by a Severance Agreement becomes subject to any excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"), the Company is obligated to pay to such executive, not later than 30 days after a change in control of the Company (within the meaning of the Code), a gross-up payment in an amount equal to (1) any excise tax to which such executive becomes subject and (2) all federal income, state income, payroll or other taxes to which the executive becomes subject with respect to the gross-up payment. The aggregate amount of these gross-up payments will be approximately $5.9 million, of which Messrs. Pomerantz, Hayford, Casey, Keough and Rogna will receive approximately $0, $0, $1.4 million, $1.5 million and $0.9 million, respectively. These payments will be deferred as described above in the section "Employee Benefit Arrangements." Restricted Stock. The Company has granted an aggregate of 2,130,500 shares of restricted, including 270,000, 310,000 and 135,000 shares of restricted stock granted to Messrs. Casey, Keough and Rogna, respectively. All restrictions on this restricted stock will lapse upon a change in control of the Company. The consummation of the Offer would constitute a change in control for purposes of this lapsing. Phantom Stock. The 1,000 phantom stock units granted to Mary Sue Coleman, Harve A. Ferrill, John E. Goodenow, David B. Hawkins, Warren J. Hayford and Ralph L. MacDonald Jr., each a non-employee director of the Company, will vest upon a change in control of the Company or when such person ceases to be a director of the Company. The consummation of the Offer would constitute a change in control for purposes of this vesting. However, as explained above in the section "Employee Benefit Arrangements," the Company and such persons have agreed to amend the phantom stock agreements so that a change in control that would be triggered upon consummation of the Offer will instead be triggered upon consummation of the Merger. Deferred Director Fees. Messrs. Ferrill, Goodenow, Hawkins, Kolb and MacDonald have elected to defer all cash fees payable for their service on the Board until they cease to be directors or file a written revocation of their election. Such deferred fees accrue gain or loss as if the deferred fees were used to acquire Common Stock at a 15% discount from the closing price at the beginning of each fiscal year. In the event that Messrs. Ferrill, Goodenow, Hawkins, Kolb and MacDonald cease to be directors in connection with the consummation of the Offer or the Merger, the deferred fees shall become payable. 14. DIVIDENDS AND DISTRIBUTIONS. The Company has not declared or paid dividends on the Shares during the past two years. As discussed in Section 11, the Merger Agreement provides that from the date of the Merger Agreement to the Effective Time, without the prior written approval of Parent, the Company will not and will not permit 37 40 any of its subsidiaries to declare, set aside or pay dividends on, or make any other distributions in respect of, any of its capital stock. 15. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of the Offer, the Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, pay for, and may postpone the acceptance for payment of and payment for Shares tendered, and, except as set forth in the Merger Agreement, terminate the Offer as to any Shares not then tendered if (1) the HSR Condition shall not have been satisfied, (2) the Minimum Stock Condition shall not have been satisfied, (3) the Minimum Note Condition shall not have been satisfied, or (4) at any time on or after the date of the Merger Agreement and before the Expiration Date, any of the following events shall occur and be continuing: (a) there shall be threatened or pending any suit, action or proceeding by any governmental entity (i) seeking to prohibit or impose any material limitations on Parent's or the Purchaser's ownership or operation (or that of any of their respective subsidiaries or affiliates) of all or a material portion of their or the Company's businesses or assets, or to compel Parent or the Purchaser or their respective subsidiaries and affiliates to dispose of or hold separate any material portion of the business or assets of the Company or Parent and their respective subsidiaries, in each case taken as a whole, (ii) challenging the acquisition by Parent or the Purchaser of any Shares under the Offer or pursuant to the Stock Option Agreement, or the Stockholders Agreement, or the acquisition by Parent or the Purchaser of any Notes pursuant to the Notes Tender Offers, seeking to restrain or prohibit the making or consummation of the Offer, the Merger, the Notes Tender Offers or the performance of any of the other transactions contemplated by the Merger Agreement, the Stock Option Agreement, the Stockholders Agreement or the agreements and documents governing the Notes Tender Offers, or seeking to obtain from the Company, Parent or the Purchaser any damages that are material in relation to the Company and its subsidiaries taken as a whole, (iii) seeking to impose material limitations on the ability of the Purchaser, or rendering the Purchaser unable, to accept for payment or pay for some or all of the Shares pursuant to the Offer and the Merger or some or all of the Notes pursuant to the Notes Tender Offers, (iv) seeking to impose material limitations on the ability of the Purchaser or Parent effectively to exercise full rights of ownership of the Shares purchased by it, including, without limitation, the right to vote the Shares purchased by it on all matters properly presented to the Company's stockholders or to exercise full rights of ownership of the Notes, or (v) which otherwise is reasonably likely to have a Company Material Adverse Affect (as defined below); or (b) there shall be any statute, rule, regulation, judgment, order or injunction enacted, entered, enforced, promulgated or deemed applicable to the Offer or the Merger, or any other action shall be taken by any governmental entity, that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above; or (c) there shall have occurred (i) any general suspension of trading in, or limitation on prices for, securities on the New York Stock Exchange, American Stock Exchange or in the Nasdaq National Market, for a period in excess of three hours (excluding any coordinated trading halt triggered solely as a result of a specified decrease in a market index for a period of less than two days and suspensions or limitations resulting solely from physical damage or interference with such exchanges not related to market conditions), (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States (whether or not mandatory), (iii) a commencement of a war, armed hostilities or other international or national calamity directly or indirectly involving the United States, (iv) any limitation (whether or not mandatory) by any United States or foreign governmental authority on the extension of credit by banks or other financial institutions, (v) a change in general financial bank or capital market conditions which materially or adversely affects the ability of financial institutions in the United States to extend credit or syndicate loans or (vi) in the case of any of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof; or 38 41 (d) there shall have occurred a material adverse effect on the condition (financial or otherwise), business, assets, liabilities, prospects or results of operations of the Company and its subsidiaries taken as a whole, excluding effects from general economic conditions, general securities market conditions or conditions affecting the Company's industry generally, or the announcement of the Merger Agreement or the transactions contemplated thereby (a "Company Material Adverse Effect"); or (e) the Company Board or any committee thereof (i) shall have withdrawn, modified or changed in a manner adverse to Parent or the Purchaser its approval or recommendation of the Offer, the Merger Agreement or the Merger, (ii) shall have recommended the approval or acceptance of an Acquisition Proposal from, or similar business combination with, a person or entity other than Parent, the Purchaser or their affiliates, or (iii) shall have executed an agreement in principle or definitive agreement relating to an Acquisition Proposal from, or similar business combination with, a person or entity other than Parent, the Purchaser or their affiliates; or (f) any of the representations and warranties of the Company set forth in the Merger Agreement that are qualified as to materiality shall not be true and correct and any such representations and warranties that are not so qualified shall not be true and correct in any material respect, in each case as of the date of the Merger Agreement and as of the scheduled expiration of the Offer, such that the aggregate effect of all such breaches of representations and warranties shall have had or is reasonably likely to have a Company Material Adverse Effect and such breach has not been cured within 10 days after Parent gives written notice thereof to the Company or the representations and warranties set forth in Sections 4.12(m) and 4.15 and the last sentence of Section 4.11 of the Merger Agreement shall not be true and correct; or (g) the Company shall have failed to perform in any material respect any material obligation or to comply in any material respect with any agreement or covenant of the Company to be performed or complied with by it under the Merger Agreement and such breach has not been cured within 10 days after Parent gives written notice thereof to the Company; or (h) all consents necessary to the consummation of the Notes Tender Offers, the Offer or the Merger including, without limitation, consents from parties to loans, contracts, leases or other agreements shall not have been obtained, other than consents the failure of which to obtain would not have a material adverse effect on the Company and its subsidiaries, taken as a whole; or (i) the Merger Agreement shall have been terminated in accordance with its terms; or (j) in the 20 business days following commencement of the Offer, the environmental due diligence conducted by Parent shall have discovered a condition or conditions at one or more of the Company's converting facilities or the Company's mills located in Pine Bluff, Arkansas, Bogalusa, Louisiana and Antioch, California (in the case of the Pine Bluff and Bogalusa mills, such due diligence investigation is to be conducted in accordance with the procedures set forth on Exhibit C to the Merger Agreement) that in the reasonable judgment of Parent will require remediation or other expenditures in an aggregate amount in excess of $5 million, with respect to the converting facilities and the Pine Bluff and Bogalusa mills, and in excess of $10 million, with respect to the Antioch mill; which in the sole judgment of Parent or Purchaser, in any such case, and regardless of the circumstances (including any action or inaction by Parent or Purchaser) giving rise to such condition makes it inadvisable to proceed with the Notes Tender Offers or the Offer and/or with such acceptance for payment of or payment for Shares. The foregoing conditions are for the sole benefit of Parent and the Purchaser, may be waived by Parent or the Purchaser, in whole or in part, at any time and from time to time in the sole discretion of Parent or the Purchaser. The failure by Parent or the Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. 39 42 16. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS. General. The Purchaser is not aware of any material pending legal proceeding relating to the Offer. Except as described in this Section 16, based on its examination of publicly available information filed by the Company with the SEC and other publicly available information concerning the Company, the Purchaser is not aware of any governmental license or regulatory permit that appears to be material to the Company's business that might be adversely affected by the Purchaser's acquisition of Shares as contemplated herein or of any approval or other action by any governmental, administrative or regulatory authority or agency, domestic or foreign, that would be required for the acquisition or ownership of Shares by the Purchaser or Parent as contemplated herein. Should any such approval or other action be required, the Purchaser currently contemplates that, except as described below under "State Takeover Statutes," such approval or other action will be sought. While the 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 needed, would be obtained or would be obtained without substantial conditions or that if such approvals were not obtained or such other actions were not taken, adverse consequences might not result to the Company's business, or certain parts of the Company's business might not have to be disposed of, any of which could cause the Purchaser to elect to terminate the Offer without the purchase of Shares thereunder under certain conditions. See Section 15. State Takeover Statutes. A number of states have adopted laws that purport, to varying degrees, to apply to attempts to acquire corporations that are incorporated in, or that have substantial assets, stockholders, principal executive offices or principal places of business or whose business operations otherwise have substantial economic effects in, such states. The Company, directly or through subsidiaries, conducts business in a number of states throughout the United States, some of which have enacted such laws. In Edgar v. MITE Corp., the Supreme Court of the United States invalidated on constitutional grounds the Illinois Business Takeover Statute which, as a matter of state securities law, made takeovers of corporations meeting certain requirements more difficult. However, in 1987, in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the State of Indiana could, as a matter of corporate law, constitutionally disqualify a potential acquiror from voting shares of a target corporation without the prior approval of the remaining stockholders where, among other things, the corporation is incorporated in, and has a substantial number of stockholders in, the 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 apply 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 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 Company Board approved for purposes of Section 203 the entering into by the Purchaser, Parent and the Company of the Merger Agreement and the consummation of the transactions contemplated thereby and has taken all appropriate action so that Section 203, with respect to the Company, will not be applicable to Parent and the Purchaser by virtue of such actions. If any government official or third party should seek to apply any state takeover law to the Offer or the Merger or other business combination between the Purchaser or any of its affiliates and the Company, the Purchaser will take such action as then appears desirable, which action may include challenging the applicability or validity of such statute in appropriate court proceedings. 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 40 43 determine that it is inapplicable or invalid as applied to the Offer or the Merger, the Purchaser might be required to file certain information with, or to receive approvals from, the relevant state authorities or holders of Shares, and the Purchaser might be unable to accept for payment or pay for Shares tendered pursuant to the Offer, or be delayed in continuing or consummating the Offer or the Merger. In such case, the Purchaser may not be obligated to accept for payment or pay for any tendered Shares. See Section 15. United States Antitrust Compliance. 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, the Purchaser expects to file a Notification and Report Form with respect to the Offer and Merger with the Antitrust Division and the FTC on or about September 28, 2001. 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, 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 the 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 the Purchaser with such request. Thereafter, such waiting period can be extended only by court order. The Antitrust Division and the FTC scrutinize the legality under the antitrust laws of transactions such as the acquisition of Shares by the 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. The 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, including conditions with respect to litigation and certain governmental actions and Section 11 for certain termination rights. 17. APPRAISAL RIGHTS. If the Merger is consummated, stockholders of the Company may have the right to dissent and demand appraisal of their Shares under the DGCL. See Section 12. Under the DGCL, dissenting stockholders who comply with the applicable statutory procedures will be entitled to receive a judicial determination of the fair value of their Shares (exclusive of any element of value arising from the accomplishment or expectation of the Merger) and to receive payment of such fair value in cash, together with a fair rate of interest, if any. Any such judicial determination of the fair value of the Shares could be based upon considerations other than or in addition to the Offer Price, the consideration per Share to be paid in the Merger and the market value of the Shares, including asset values and the investment value of the Shares. Stockholders should recognize that the value so determined could be higher or lower than the price per Share paid pursuant to the Offer or the consideration per Share to be paid in the Merger. 18. FEES AND EXPENSES. Salomon Smith Barney is acting as the Dealer Manager in connection with the Offer, the Notes Tender Offers and Parent's proposed acquisition of the Company. Salomon Smith Barney will receive reasonable and customary compensation for its services relating to the Offer and the Notes Tender Offers and will be reimbursed for certain out-of-pocket expenses. Parent, the Purchaser and Inland Container Corporation I have agreed to indemnify Salomon Smith Barney and certain related persons against certain liabilities and expenses in connection with its engagement, including certain liabilities under the federal securities laws. 41 44 Parent and the Purchaser have retained D. F. King & Co., Inc. to be the Information Agent and Computershare Trust Company of New York 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 the 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 the Purchaser for customary mailing and handling expenses incurred by them in forwarding offering materials to their customers. 19. MISCELLANEOUS. The Offer 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. However, the Purchaser may, in its discretion, take such action as it may deem necessary to make the Offer in any such jurisdiction and extend the Offer to holders of Shares in such jurisdiction. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION ON BEHALF OF PARENT OR THE PURCHASER NOT CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. The Purchaser has filed with the SEC a Tender Offer Statement on Schedule TO pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act, together with exhibits furnishing certain additional information with respect to the Offer, and may file amendments thereto. In addition, the Company has filed with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9, together with exhibits, pursuant to Rule 14d-9 under the Exchange Act, setting forth the recommendations of the Company Board with respect to the Offer and the reasons for such recommendations and furnishing certain additional related information. A copy of such documents, and any amendments thereto, may be examined at, and copies may be obtained from, the SEC (but not the regional offices of the SEC) in the manner set forth under Section 7 above. TEMPLE-INLAND ACQUISITION CORPORATION September 28, 2001 42 45 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER 1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The following table sets forth the name, present principal occupation or employment and material occupations, positions, offices or employments for the past five years of each director and executive officer of Parent. Unless otherwise indicated, the current business address of each person is 303 South Temple Drive, Diboll, Texas 75941. Unless otherwise indicated, each such person is a citizen of the United States of America and each occupation set forth opposite an individual's name refers to employment with Parent. None of Parent's directors or executive officers beneficially owns any equity securities, or rights to acquire any equity securities, of the Company, except that Bart J. Doney and Dale E. Stahl own 2,000 and 20,000 Shares, respectively. There is no family relationship between any of the directors and executive officers of Parent other than Arthur Temple III and Charlotte Temple, who are brother and sister.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS NAME AND BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS ------------------------- ------------------------------- Robert Cizik Member, Board of Directors. Mr. Cizik, age 70, is the Cizik Interests former Chairman and Chief Executive Officer of Cooper Texas Commerce Tower Industries, Inc., Houston, Texas, a diversified 600 Travis, Suite 3628 international manufacturing company (1975-1996). He Houston, TX 77002 currently serves as Non-Executive Chairman of Koppers Industries, Inc., Pittsburgh, Pennsylvania, and as a director of Air Products and Chemicals, Inc. He previously served as a director of Harris Corporation from 1988 until November 1999. Anthony M. Frank Member, Board of Directors. Mr. Frank, age 70, is Belvedere Capital Partners, Inc. Chairman of Belvedere Capital Partners, Inc. He Chairman of the Board served as Postmaster General of the United States One Maritime Plaza from 1988 until 1992. Mr. Frank is also a director of Suite 825 The Charles Schwab Corporation, General American San Francisco, CA 94111 Investors Company, Inc., Bedford Properties, Inc., Crescent Real Estate Equities, and Cotelligent, Inc. James T. Hackett Member, Board of Directors. Mr. Hackett, age 47, is Ocean Energy Chairman, President and Chief Executive Officer, Chairman, President & Chief Executive Officer Ocean Energy, Inc. Mr. Hackett was Chairman and Chief 1001 Fannin Executive Officer of Seagull Energy Corporation from Suite 1600 1998 until it merged with Ocean Energy, Inc. in March Houston, TX 77002-6794 1999, when he assumed the title of Chief Executive Officer and President. He assumed the Chairman title on January 1, 2000. Mr. Hackett served as President-Energy Services Group of Duke Energy Corporation, Houston, Texas from 1997 until 1998 and as Executive Vice President of PanEnergy Corporation (which merged into Duke Energy) from 1996 until 1997. Mr. Hackett is also a director of New Jersey Resources Corporation, Kaiser Aluminum & Chemical Corporation and the Fluor Corporation. William B. Howes Member, Board of Directors. Mr. Howes, age 64, has Inland Paperboard and Packaging, Inc. served as Executive Vice President of Parent since 4030 Vincennes Road 1996. Mr. Howes is also Chairman of the Board and Indianapolis, IN 46268 Chief Executive Officer of Parent's Inland Paperboard and Packaging, Inc. subsidiary.
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PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS NAME AND BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS ------------------------- ------------------------------- Bobby R. Inman Member, Board of Directors. Admiral Inman, age 70, is 701 Brazos, Suite 500 Managing Director of Inman Ventures, an investment Austin, TX 78701 firm. He is a director of Fluor Corporation, SBC Communications Inc., Science Applications International Corp. and Xerox Corporation. Kenneth M. Jastrow, II Chairman and Chief Executive Officer of Parent. Mr. Chairman and Chief Executive Officer Jastrow, age 54, was elected to his current office Temple-Inland Inc. effective January 1, 2000. He served as Group Vice 1300 South MoPac Expressway, President of the Parent from 1995 until 1998, as Second Floor President and Chief Operating Officer in 1998 and Austin, TX 78746 1999, and as Chief Financial Officer of Parent from November 1991 until 1999. James A. Johnson Member, Board of Directors. Mr. Johnson, age 57, is Vice Chairman Chairman and Chief Executive Officer of Johnson Perseus LLC Capital Partners. Mr. Johnson served as Chairman of 2999 Pennsylvania Ave., N.W. the Executive Committee of the Board of Fannie Mae in Suite 900 1999 and as Chairman and Chief Executive Officer of Washington, DC 20006 Fannie Mae from 1991 through 1998. He is also a director of Cummins Engine Company, Inc., Target Corporation, The Goldman Sachs Group, Inc., Kaufman and Broad Home Corporation, UnitedHealth Group, and Gannett Co., Inc. W. Allen Reed Member, Board of Directors. Mr. Reed, age 54, has President and Chief Executive Officer served as President and Chief Executive Officer of General Motors Investment Management General Motors Investment Management Corporation Corporation since 1994. Mr. Reed also serves as Chairman and CEO 767 Fifth Avenue of the GM Trust Company and as a Corporate Vice New York, NY 10153 President of General Motors Corporation. He is also a director of iShares, MSCI Series, Inc., FLIR Systems, Inc. and General Motors Acceptance Corporation (GMAC). Herbert A. Sklenar Member, Board of Directors. Mr. Sklenar, age 70, is Chairman of the Board Emeritus Chairman of the Board Emeritus of Vulcan Materials Vulcan Materials Company Company, a producer of construction materials and 1200 Urban Center Drive chemicals. Mr. Sklenar served as Chief Executive Birmingham, AL 35242 Officer of Vulcan Materials Company from 1986 until February 1997 and he served as Chairman from 1992 until his retirement in 1997. Arthur Temple III Member, Board of Directors. Mr. Temple, age 59, is Chairman & Chief Executive Officer Chairman of the Board and Chief Executive Officer of Exeter Investment Company Exeter Investment Company. Mr. Temple served as 109 Temple Blvd. Chairman of the Board of Exeter Investment Company Lufkin, TX 75901 from 1975 to early 1982 and since March 1986. He is also Chairman of the Board of First Bank & Trust, East Texas. Charlotte Temple Member, Board of Directors. Ms. Temple, age 61, is a Temple Vineyards private investor. During at least the past five 400 Taplin Road years, Ms. Temple has been associated with various St. Helena, CA 94574 civic organizations while pursuing private interests. She is Owner and President of Temple Vineyards, grower of prime Napa Valley grapes. Ms. Temple is also a director of Exeter Investment Company.
44 47
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS NAME AND BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS ------------------------- ------------------------------- Larry E. Temple Member, Board of Directors. Mr. Temple, age 65, is an 400 W. 15th Street attorney and during the last five years has been in Suite 1510 private practice. He is a member of the Board and Austin, TX 78701 President of the Lyndon B. Johnson Foundation. Harold C. Maxwell Mr. Maxwell, age 61, became Executive Vice President of Parent in February 2000 after serving as Group Vice President since May 1989. In March 1998, Mr. Maxwell was named Chairman of the Board, President, and Chief Executive Officer of Temple-Inland Forest Products Corporation after having served as Group Vice President -- Building Products of Temple-Inland Forest Products Corporation since November 1982. Bart J. Doney Mr. Doney, age 51, became Group Vice President of Parent in February 2000. Mr. Doney has served Inland Paperboard and Packaging, Inc. as Executive Vice President, Packaging since June 1998, and Senior Vice President from 1996 until 1998. Kenneth R. Dubuque Mr. Dubuque, age 52, became Group Vice President of Parent in February 2000. In October 1998, Mr. Dubuque was named President and Chief Executive Officer of Guaranty Federal Bank, F.S.B., Parents' savings bank. From 1996 until 1998, Mr. Dubuque served as Executive Vice President and Manager -- International Trust and Investment of Mellon Bank Corporation. James C. Foxworthy Mr. Foxworthy, age 50, became Group Vice President of Parent in February 2000. Mr. Foxworthy also serves as Executive Vice President, Paperboard of Inland Paperboard and Packaging, Inc., a position he has held since June 1998. From 1995 until 1998, he served as Senior Vice President of Inland Paperboard and Packaging, Inc. Dale E. Stahl Mr. Stahl, age 53, became Group Vice President of Parent in July 2000. Mr. Stahl served as President and Chief Operating Officer of Gaylord Container Corporation for twelve years prior to joining Parent. Jack C. Sweeny Mr. Sweeney, age 54, became a Group Vice President of Parent in May 1996. He also serves as Executive Vice President, Forest/Solid Wood and a Director of Temple-Inland Forest Products Corporation. M. Richard Warner Mr. Warner, age 49, became Vice President and General Counsel of Parent in June 1994 and was named Chief Administrative Officer in May 1999. Randall D. Levy Mr. Levy, age 50, became Chief Financial Officer of Parent in May 1999. Mr. Levy joined Guaranty Federal Bank, F.S.B. in 1989 serving in various capacities, most recently as Chief Operating Officer from 1994 to 1999.
45 48
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS NAME AND BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS ------------------------- ------------------------------- Louis R. Brill Mr. Brill, age 60, became Vice President, Controller of Parent in December 1999 and was named Chief Accounting Officer in May 2000. Before joining Parent in 1999, Mr. Brill was a partner of Ernst & Young LLP for 25 years. Scott Smith Mr. Smith, age 47, became Chief Financial Officer of Guaranty Federal Bank, F.S.B. in July 2001, Chief Accounting Officer of Temple-Inland Financial Services Inc. in June 2001 and Chief Information Officer of Parent in February 2000. Prior to that, Mr. Smith was Treasurer of Guaranty Federal Bank, F.S.B. from November 1993 to December 1999 and Chief Information Officer of Temple-Inland Financial Services Inc. from August 1995 to June 1999. Doyle R. Simons Mr. Simons, age 37, became Vice President - Administration in November 2000. Mr. Simons has served as the Director of Investor Relations for Parent since 1994. David W. Turpin Mr. Turpin, age 50, became Treasurer of Parent in June 1991. Mr. Turpin also serves as the Executive Vice President and Chief Financial Officer of Lumbermen's Investment Corporation, a real estate subsidiary of Parent. Leslie K. O'Neal Ms. O'Neal, age 45, became Secretary of Parent in February 2000 after serving as Assistant Secretary since 1995. Ms. O'Neal also serves as Assistant General Counsel of Parent, a position she has held since 1985. Ms. O'Neal also serves as Secretary of various subsidiaries of Parent.
46 49 2. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER. The following table sets forth the name, present principal occupation or employment and material occupations, positions, offices or employments for the past five years of each director and executive officer of the Purchaser. The current business address of each person is 303 South Temple Drive, Diboll, Texas 75941. Each person is a citizen of the United States of America and each occupation set forth opposite an individual's name refers to employment with Parent. None of the Purchaser's directors or executive officers beneficially owns any equity securities, or rights to acquire any equity securities, of the Company, except that Bart J. Doney and Dale E. Stahl own 2,000 and 20,000 Shares, respectively.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS NAME, AGE AND BUSINESS ADDRESS HELD DURING THE PAST FIVE YEARS ------------------------------ ------------------------------- Kenneth M. Jastrow, II Member, Board of Directors. See Part 1 of this Schedule I. Dale E. Stahl Member, Board of Directors. President of the Purchaser. See Part 1 of this Schedule I. M. Richard Warner Member, Board of Directors. Vice President of the Purchaser. See Part 1 of this Schedule I. Bart J. Doney Vice President of the Purchaser. See Part 1 of this Schedule I. James C. Foxworthy Vice President of the Purchaser. See Part 1 of this Schedule I. Leslie K. O'Neal Secretary of the Purchaser. See Part 1 of this Schedule I. David W. Turpin Treasurer of the Purchaser. See Part 1 of this Schedule I.
47 50 Manually signed facsimile copies of the Letter of Transmittal, properly completed and duly executed, will be accepted. The Letter of Transmittal, certificates for Shares and any other required documents should be sent or delivered by each stockholder of the Company or such stockholder's broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of the addresses set forth below: The Depositary for the Offer is: COMPUTERSHARE TRUST COMPANY OF NEW YORK By Mail: By Overnight Delivery: By Hand: Wall Street Station Wall Street Plaza Wall Street Plaza P.O. Box 1010 88 Pine Street, 19th Floor 88 Pine Street, 19th Floor New York, NY 10268-1010 New York, NY 10005 New York, NY 10005 By Facsimile Transmission: (For Eligible Institutions Only) (212) 701-7636 Confirm Facsimile by Telephone: (212) 701-7624
Questions or requests for assistance may be directed to the Information Agent or the Dealer Manager, at the addresses and telephone numbers set forth below. Additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and related materials may be obtained from the Information Agent or the Dealer Manager as set forth below and will be furnished promptly at the Purchaser's expense. Stockholders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer is: D. F. KING & CO., INC. 77 Water Street New York, New York 10005 Banks and Brokers Call Collect: (212) 269-5550 All Others Call Toll-Free: (800) 549-6650 The Dealer Manager for the Offer is: SALOMON SMITH BARNEY 388 Greenwich Street New York, New York 10013 Call Toll-Free: (877) 446-1850
EX-99.(A)(2) 4 d90566ex99-a2.txt FORM OF LETTER OF TRANSMITTAL 1 LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE PREFERRED STOCK) OF GAYLORD CONTAINER CORPORATION PURSUANT TO THE OFFER TO PURCHASE DATED SEPTEMBER 28, 2001 BY TEMPLE-INLAND ACQUISITION CORPORATION AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF TEMPLE-INLAND INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, OCTOBER 26, 2001, UNLESS THE OFFER IS EXTENDED. The Depositary for the Offer is: COMPUTERSHARE TRUST COMPANY OF NEW YORK By Mail: By Overnight Delivery: By Hand: Wall Street Station Wall Street Plaza Wall Street Plaza P.O. Box 1010 88 Pine Street, 19th Floor 88 Pine Street, 19th Floor New York, NY 10268-1010 New York, NY 10005 New York, NY 10005
By Facsimile Transmission: (For Eligible Institutions Only) (212) 701-7636 Confirm Facsimile by Telephone: (212) 701-7624 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE PROVIDED THEREFOR BELOW, WITH SIGNATURE GUARANTEE, IF REQUIRED, AND COMPLETE THE SUBSTITUTE FORM W-9 SET FORTH BELOW. THE INSTRUCTIONS CONTAINED WITHIN 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, IF BLANK) (PLEASE ATTACH ADDITIONAL SIGNED LIST, IF NECESSARY) -------------------------------------------------------------------------------------------------------------------- TOTAL NUMBER OF SHARE CERTIFICATE SHARES REPRESENTED BY NUMBER OF SHARES NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2) --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- TOTAL SHARES TENDERED -------------------------------------------------------------------------------------------------------------------- (1) Need not be completed by stockholders who deliver Shares by book-entry transfer. (2) Unless otherwise indicated, all Shares represented by certificates delivered to the Depositary will be deemed to have been tendered for payment. See Instruction 4. [ ] CHECK HERE IF ANY OF THE CERTIFICATES REPRESENTING SHARES THAT YOU OWN HAVE BEEN LOST, DESTROYED OR STOLEN. SEE INSTRUCTION 11. --------------------------------------------------------------------------------------------------------------------
The names and addresses of the registered holders of the tendered Shares should be printed, if not already printed above, exactly as they appear on the Share Certificates tendered hereby. 2 This Letter of Transmittal is to be used by stockholders of Gaylord Container Corporation if Share Certificates (as defined below) are to be forwarded herewith or, unless an Agent's Message (as defined in Section 3 of the Offer to Purchase) is utilized, if delivery of Shares is to be made by book-entry transfer to an account maintained by the Depositary at The Depository Trust Company (pursuant to the procedures set forth in Section 3 of the Offer to Purchase). Holders of Shares whose certificates for such Shares (the "Share Certificates") are not immediately available, or who cannot complete the procedure for book-entry transfer on a timely basis, or who cannot deliver all other required documents to the Depositary prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase), must tender their Shares according to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. See Instruction 2 herein. DELIVERY OF DOCUMENTS TO THE DEPOSITORY TRUST COMPANY WILL NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. TENDER OF SHARES [ ]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE DEPOSITARY'S ACCOUNT AT THE DEPOSITORY TRUST COMPANY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE DEPOSITORY TRUST COMPANY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER): 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 Holder(s): ----------------------------------------------- Window Ticket Number (if any): ----------------------------------------------- Date of Execution of Notice of Guaranteed Delivery: -------------------------- Name of Eligible Institution that Guaranteed Delivery: ----------------------- 2 3 NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to Temple-Inland Acquisition Corporation, a Delaware corporation (the "Purchaser") and an indirect, wholly-owned subsidiary of Temple-Inland Inc., a Delaware corporation (the "Parent"), the above-described shares of Class A Common Stock, par value $.0001 per share (the "Common Stock"), of Gaylord Container Corporation, a Delaware corporation (the "Company"), including the associated rights to purchase preferred stock issued pursuant to the Rights Agreement (as defined in the Offer to Purchase) (the "Rights" and, together with the Common Stock, the "Shares"), pursuant to the Purchaser's offer to purchase all outstanding Shares for $1.80 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 September 28, 2001 (the "Offer to Purchase"), and in this Letter of Transmittal (which, together with the Offer to Purchase and any amendments or supplements thereto or hereto, collectively constitute the "Offer"). The undersigned understands that the Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its affiliates, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve the 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. Receipt of the Offer is hereby acknowledged. The Company has distributed one Right for each outstanding Share pursuant to the Rights Agreement. The Rights are currently evidenced by and trade with certificates evidencing the Common Stock. The Company has taken such action so as to make the Rights Agreement inapplicable to the Purchaser and its affiliates and associates in connection with the Merger Agreement (as defined below) and the transactions contemplated thereby. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of September 27, 2001 (the "Merger Agreement"), among the Parent, the Purchaser and the Company. Upon the terms and subject to the conditions of the Offer (and if the Offer is extended or amended, the terms of any such extension or amendment), and effective upon acceptance for payment of the Shares tendered herewith in accordance with the terms of the Offer, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Purchaser all right, title and interest in and to all of the Shares that are being tendered hereby (and any and all dividends, distributions, rights, other Shares or other securities issued or issuable in respect thereof with a record date before, and a payment date after the Expiration Date (as defined in the Offer to Purchase) (collectively, "Distributions") and irrevocably constitutes and appoints Computershare Trust Company of New York (the "Depositary") the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares (and all Distributions), with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (i) deliver certificates for such Shares (and any and all Distributions) or transfer ownership of such Shares (and any and all Distributions) on the account books maintained by The Depository Trust Company, together, in any such case, with all accompanying evidences of transfer and authenticity, to or upon the order of the Purchaser, (ii) present such Shares (and any and all Distributions) for transfer on the books of the Company, and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and any and all Distributions), all in accordance with the terms of the Offer. By executing this Letter of Transmittal, the undersigned hereby irrevocably appoints Kenneth M. Jastrow, II, Dale E. Stahl and M. Richard Warner in their respective capacities as officers or directors of the Purchaser, and any individual who shall thereafter succeed to any such office of the Purchaser, and each of them, and any other designees of the Purchaser, the attorneys-in-fact and proxies of the undersigned, each with full power of substitution, to vote at any annual or special meeting of the Company's stockholders or any adjournment or postponement thereof or otherwise in such manner as each 3 4 such attorney-in-fact and proxy or his or her substitute shall in his or her sole discretion deem proper with respect to, to execute any written consent concerning any matter as each such attorney-in-fact and proxy or his or her substitute shall in his or her sole discretion deem proper with respect to, and to otherwise act as each such attorney-in-fact and proxy or his or her substitute shall in his or her sole discretion deem proper with respect to, all of the Shares (and any and all Distributions) tendered hereby and accepted for payment by the Purchaser. This appointment will be effective if and when, and only to the extent that, the Purchaser accepts such Shares for payment pursuant to the Offer. This power of attorney and proxy are irrevocable and are granted in consideration of the acceptance for payment of such Shares in accordance with the terms of the Offer. Such acceptance for payment shall, without further action, revoke any prior powers of attorney and proxies granted by the undersigned at any time with respect to such Shares (and any and all Distributions), and no subsequent powers of attorney, proxies, consents or revocations may be given by the undersigned with respect thereto (and, if given, will not be deemed effective). The Purchaser reserves the right to require that, in order for the Shares or other securities to be deemed validly tendered, immediately upon the Purchaser's acceptance for payment of such Shares, the Purchaser must be able to exercise full voting, consent and other rights with respect to such Shares (and any and all Distributions), including voting at any meeting of the Company's stockholders. 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 all Distributions and that, when the same are accepted for payment by the Purchaser, the Purchaser will acquire good, marketable and unencumbered title thereto and to all Distributions, free and clear of all liens, restrictions, charges and encumbrances and the same will not be subject to any adverse claims. The undersigned shall, upon request, execute and deliver any additional documents deemed by the Depositary or the Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby and all Distributions. In addition, the undersigned shall remit and transfer promptly to the Depositary for the account of the Purchaser all Distributions in respect of the Shares tendered hereby, accompanied by appropriate documentation of transfer, and, pending such remittance and transfer or appropriate assurance thereof, the Purchaser shall be entitled to all rights and privileges as owner of each such Distribution and may withhold the entire purchase price of the Shares tendered hereby or deduct from such purchase price, the amount or value of such Distribution as determined by the Purchaser in its sole discretion. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, executors, administrators, personal representatives, trustees in bankruptcy, successors and assigns of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. The undersigned understands that the valid tender of the Shares pursuant to any one of the procedures described in Section 3 of the Offer to Purchase and in the Instructions hereto will constitute a binding agreement between the undersigned and the Purchaser upon the terms and subject to the conditions of the Offer (and if the Offer is extended or amended, the terms or conditions of any such extension or amendment). Without limiting the foregoing, if the price to be paid in the Offer is amended in accordance with the Merger Agreement, the price to be paid to the undersigned will be the amended price notwithstanding the fact that a different price is stated in this Letter of Transmittal. The undersigned recognizes that under certain circumstances set forth in the Offer to Purchase, the Purchaser may not be required to accept for payment any of the Shares tendered hereby. Unless otherwise indicated herein in the box entitled "Special Payment Instructions," please issue the check for the purchase price of all of the Shares purchased and/or return any certificates for the Shares not tendered or accepted for payment in the name(s) of the registered holder(s) appearing above under "Description of Shares Tendered." Similarly, unless otherwise indicated herein in the box entitled "Special Delivery Instructions," please mail the check for the purchase price of all of the Shares purchased and/or return any certificates for the Shares not tendered or not accepted for payment (and any accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing above under "Description of Shares Tendered." In the event that the boxes entitled "Special Payment Instructions" and "Special Delivery Instructions" are both completed, please issue the check for the purchase price of 4 5 all Shares purchased and/or return any certificates evidencing Shares not tendered or not accepted for payment (and any accompanying documents, as appropriate) in the name(s) of, and deliver such check for the purchase price and/or return any such Share certificates (and any accompanying documents, as appropriate) to, the person(s) so indicated. Unless otherwise indicated herein in the box entitled "Special Payment Instructions," please credit any Shares tendered herewith by book-entry transfer that are not accepted for payment by crediting the account at The Depository Trust Company. The undersigned recognizes that the Purchaser has no obligation, pursuant to the "Special Payment Instructions," to transfer any Shares from the name of the registered holder thereof if the Purchaser does not accept for payment any of the Shares so tendered. 5 6 ------------------------------------------------------------ SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the purchase price of Shares accepted for payment and/or certificates representing Shares not tendered or accepted for payment are to be issued in the name of someone other than the undersigned. Issue: [ ] Check; [ ] Certificate(s) to: Name ---------------------------------------------------- (PLEASE PRINT) Address -------------------------------------------------- ------------------------------------------------------------ (INCLUDE ZIP CODE) ------------------------------------------------------------ (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER) (SEE SUBSTITUTE FORM W-9 BELOW) ------------------------------------------------------------ ------------------------------------------------------------ SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for the purchase price of Shares accepted for payment and/or certificates representing Shares not tendered or accepted for payment are to be sent to someone other than the undersigned or to the undersigned at an address other than that shown under "Description of Shares Tendered." Mail: [ ] Check; [ ] Certificate(s) to: Name ---------------------------------------------------- (PLEASE PRINT) Address -------------------------------------------------- ------------------------------------------------------------ (INCLUDE ZIP CODE) ------------------------------------------------------------ ------------------------------------------------------------ 6 7 IMPORTANT STOCKHOLDER: SIGN HERE (ALSO COMPLETE SUBSTITUTE FORM W-9 INCLUDED HEREIN) -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- (SIGNATURE(S) OF OWNER(S)) Name(s) ----------------------------------------------------------------------- -------------------------------------------------------------------------------- Capacity (Full Title) -------------------------------------------------------------- (SEE INSTRUCTIONS) Address ------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number ------------------------------------------------- Taxpayer Identification or Social Security Number ---------------------------------------------------------- (SEE SUBSTITUTE FORM W-9) Dated: --------------------- , 2001 (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, 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) Authorized Signature(s) --------------------------------------------------------- Name ---------------------------------------------------------------------------- Name of Firm -------------------------------------------------------------------- Address ------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number -------------------------------------------------- Dated: --------------------- , 2001 7 8 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. Guarantee of Signatures. No signature guarantee is required on this Letter of Transmittal (a) if this Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this Section, includes any participant in The Depository Trust Company's systems whose name appears on a security position listing as the owner of the Shares) of Shares tendered herewith, unless such registered holder(s) has completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on this Letter of Transmittal or (b) if such Shares are tendered for the account of a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that is a participant in the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program or by any other "eligible guarantor institution," as such term is defined in Rule 17Ad-15 under the Securities Exchange Act of 1934, as amended (each, 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. Requirements of Tender. This Letter of Transmittal is to be completed by stockholders if certificates are to be forwarded herewith or, unless an Agent's Message is utilized, if tenders are to be made pursuant to the procedure for tender by book-entry transfer set forth in Section 3 of the Offer to Purchase. Share Certificates evidencing tendered Shares, or timely confirmation (a "Book-Entry Confirmation") of a book-entry transfer of shares into the Depositary's account at The Depository Trust Company, as well as this Letter of Transmittal (or a facsimile hereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer, and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth herein prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase). Stockholders whose Share Certificates are not immediately available, or who cannot complete the procedure for delivery by book-entry transfer on a timely basis or who cannot deliver all other required documents to the Depositary prior to the Expiration Date, may tender their Shares by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant to such procedure: (a) such tender must be made by or through an Eligible Institution; (b) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by the Purchaser, must be received by the Depositary prior to the Expiration Date; and (c) the Share Certificates (or a Book-Entry Confirmation) evidencing all tendered Shares, in proper form for transfer, in each case together with this Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees (or, in the case of a book-entry delivery, 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. If Share Certificates are forwarded separately to the Depositary, a properly completed and duly executed Letter of Transmittal must accompany each such delivery. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE DEPOSITORY TRUST COMPANY, IS AT THE OPTION AND THE RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF BOOK-ENTRY TRANSFER, RECEIPT OF A BOOK-ENTRY CONFIRMATION). 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. 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 a facsimile hereof), waive any right to receive any notice of the acceptance of their Shares for payment. 3. Inadequate Space. If the space provided herein under "Description of Shares Tendered" is inadequate, the Share Certificate numbers and/or the number of Shares and any other required information should be listed on a separate signed schedule attached hereto. 8 9 4. Partial Tenders (not applicable to stockholders who tender by book-entry transfer). If fewer than all of the Shares evidenced by any Share Certificate delivered to the Depositary herewith are to be tendered hereby, fill in the number of Shares that are to be tendered in the box entitled "Number of Shares Tendered." In this case, new Share Certificates for the Shares that were evidenced by your old Share Certificates but were not tendered by you, will be sent to you, unless otherwise provided in the appropriate box on this Letter of Transmittal, as soon as practicable after the Expiration Date. All Shares represented by Share Certificates delivered to the Depositary will be deemed to have been tendered for purchase 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 with the name(s) as written on the face of the certificate(s) without alteration, enlargement or any change whatsoever. If any of the Shares tendered by this Letter of Transmittal are held of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any of the 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 Share Certificates. If this Letter of Transmittal or any Share 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 the Purchaser of the authority of such person so to act must be submitted. If this Letter of Transmittal is signed by the registered holder(s) of the Shares listed and transmitted hereby, no endorsements of Share Certificates or separate stock powers are required unless payment is to be made or certificates for Shares not tendered or not accepted for payment are to be issued in the name of a person other than the registered holder(s). Signatures on any such Share Certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Share Certificates listed and transmitted hereby, the Share Certificate(s) must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on the Share Certificate(s). Signature(s) on any such Share Certificates or stock powers must be guaranteed by an Eligible Institution. 6. Stock Transfer Taxes. Except as otherwise provided in this Instruction 6, the Purchaser will pay all stock transfer taxes with respect to the transfer and sale of any Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or if Share Certificates not tendered or not accepted for payment are to be registered in the name of, any person other than the registered holder(s), or if tendered Share Certificate(s) 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 other person will be deducted from the purchase price of such Shares purchased unless evidence satisfactory to the Purchaser of the payment of such taxes, or exemption therefrom, is submitted. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the Share Certificate(s) tendered hereby. 7. Special Payment and Delivery Instructions. If a check for the purchase price of any Shares accepted for payment is to be issued in the name of, and/or certificates for Shares not tendered or not accepted for payment are to be issued in the name of and/or returned to, a person other than the person(s) signing this Letter of Transmittal or if a check is to be sent, and/or such certificates are to be returned, to a person other than the person(s) signing this Letter of Transmittal or to an address other 9 10 than that shown in this Letter of Transmittal, the appropriate boxes on this Letter of Transmittal must be completed. 8. Substitute Form W-9. A tendering stockholder is required to provide the Depositary with a correct Taxpayer Identification Number ("TIN") on Substitute Form W-9, which is provided under "Important Tax Information" below, and to certify, under penalties of perjury, that such TIN is correct, that such stockholder is not subject to backup withholding of federal income tax, and that such stockholder is a U.S. person (including a U.S. resident alien). If a tendering stockholder is subject to backup withholding, the tendering stockholder must cross out Item (Y) of Part 3 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 backup withholding on any payments made to such stockholder at a rate equal to the fourth lowest rate applicable to ordinary income of unmarried individuals (for payments made after August 6, 2001 and before January 1, 2002, the backup withholding rate is 30.5%), but such withholdings will be refunded if such stockholder provides a TIN within 60 days. Certain stockholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. Noncorporate foreign stockholders should submit an appropriate and properly completed IRS Form W-8BEN, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for more instructions. 9. Requests for Assistance or Additional Copies. Questions and requests for assistance or additional copies of the Offer to Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery, IRS Form W-8BEN and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 may be directed to the Information Agent or Dealer Manager at the addresses and phone numbers set forth below, or from brokers, dealers, commercial banks or trust companies. 10. Waiver of Conditions. Subject to the terms and conditions of the Merger Agreement, the Purchaser reserves the right, in its sole discretion, to waive, at any time or from time to time, any of the specified conditions of the Offer, in whole or in part, in the case of any Shares tendered (other than the Minimum Condition, as defined in the Merger Agreement). 11. Lost, Destroyed or Stolen Certificates. If any Share Certificate has been lost, destroyed or stolen, the stockholder should promptly notify Computershare Trust Company of New York in its capacity as transfer agent for the Shares (telephone number: (800) 245-7630). The stockholder will then be instructed as to the steps that must be taken in order to replace the certificate. THIS LETTER OF TRANSMITTAL AND RELATED DOCUMENTS CANNOT BE PROCESSED UNTIL THE PROCEDURES FOR REPLACING LOST OR DESTROYED CERTIFICATES HAVE BEEN FOLLOWED. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED FACSIMILE HEREOF) TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES, OR, IN THE CASE OF A BOOK-ENTRY TRANSFER, AN AGENT'S MESSAGE, AND ANY OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE AND EITHER CERTIFICATES FOR TENDERED SHARES MUST BE RECEIVED BY THE DEPOSITARY OR SHARES MUST BE DELIVERED PURSUANT TO THE PROCEDURES FOR BOOK-ENTRY TRANSFER, IN EACH CASE PRIOR TO THE EXPIRATION DATE, OR THE TENDERING STOCKHOLDER MUST COMPLY WITH THE PROCEDURES FOR GUARANTEED DELIVERY. 10 11 IMPORTANT TAX INFORMATION Under the federal income tax law, a stockholder whose tendered Shares are accepted for payment is required to provide the Depositary with such stockholder's correct TIN on the Substitute Form W-9 below. If such stockholder is an individual, the TIN is such stockholder's Social Security Number. If such stockholder is subject to backup withholding, such stockholder must cross out Item (Y) of Part 3 on the Substitute Form W-9. If the Depositary is not provided with the correct TIN, such stockholder may be subject to a $50 penalty imposed by the Internal Revenue Service. In addition, payments that are made to such stockholder may be subject to backup withholding at a rate equal to the fourth lowest rate applicable to ordinary income of unmarried individuals (for payments made after August 6, 2001 and before January 1, 2002, the backup withholding rate is 30.5%). Certain stockholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, such individual must submit an appropriate and properly completed IRS Form W-8BEN, attesting to that individual's exempt status. Such a Form W-8BEN may be obtained from the Depositary. Exempt stockholders, other than foreign individuals, should furnish their TIN, write "Exempt" in Part 2 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 backup withholding applies, the Depositary is required to withhold on any payments made to the stockholder at a rate equal to the fourth lowest rate applicable to ordinary income of unmarried individuals (for payments made after August 6, 2001 and before January 1, 2002, the backup withholding rate is 30.5%). Backup withholding is not an additional tax. Rather, the tax liability of persons subject to withholding will be reduced by the amount of tax withheld. If backup withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. PURPOSE OF SUBSTITUTE FORM W-9 To prevent 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 form below certifying that the TIN provided on Substitute Form W-9 is correct (or that such stockholder is awaiting a TIN). WHAT NUMBER TO GIVE THE DEPOSITARY The stockholder is required to give the Depositary the Social Security Number of the record holder 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, the stockholder should check the box in Part 1(b), sign and date the Substitute Form W-9. If the box in Part 1(b) is checked, the Depositary will withhold at a rate equal to the fourth lowest rate applicable to ordinary income of unmarried individuals (for payments made after August 6, 2001 and before January 1, 2002, the backup withholding rate is 30.5%) on payments made for the stockholder, but such withholdings will be refunded if the tendering stockholder provides a TIN within 60 days. 11 12 PAYER'S NAME: COMPUTERSHARE TRUST COMPANY OF NEW YORK Name ------------------------------------------------------------------------ SUBSTITUTE Address FORM W-9 --------------------------------------------------------------------- ----------------------------------------------------------------------------- (Number and Street) ----------------------------------------------------------------------------- (Zip Code) (City) (State) DEPARTMENT OF THE PART 1(A) -- PLEASE PROVIDE YOUR TIN TREASURY INTERNAL IN THE BOX AT RIGHT AND CERTIFY BY TIN REVENUE SERVICE SIGNING AND DATING BELOW. --------------------------------- ------------------------------------ (Social Security Number or Employer Identification Number) PART 1(B) -- PLEASE CHECK THE BOX AT RIGHT IF YOU HAVE APPLIED FOR, AND ARE AWAITING RECEIPT OF, YOUR TIN [ ] PAYER'S REQUEST FOR PART 2 -- FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING PLEASE WRITE "EXEMPT" TAXPAYER IDENTIFICATION HERE (SEE INSTRUCTIONS) NUMBER (TIN) ---------------------------------------------------------------------------- PART 3 -- CERTIFICATION UNDER PENALTIES OF PERJURY, I CERTIFY THAT (X) The number shown on this form is my correct TIN (or I am waiting for a number to be issued to me) and (Y) I am not subject to backup withholding because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the "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 am no longer subject to backup withholding, and (Z) I am a U.S. person (including a U.S. resident alien). SIGNATURE SIGN HERE ------------------------------------------------------------------- DATE ------------------------------------------------------------------------
CERTIFICATION OF INSTRUCTIONS -- You must cross out Item (Y) of Part 3 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. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out such Item (Y). 12 13 YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 1(B) OF THE SUBSTITUTE FORM W-9 INDICATING YOU HAVE APPLIED FOR, AND ARE AWAITING RECEIPT OF, 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 TO THE PAYOR BY THE TIME OF PAYMENT, BACKUP WITHHOLDING WILL BE WITHHELD ON ALL REPORTABLE PAYMENTS MADE TO ME PURSUANT TO THIS OFFER. ----------------------------------------- ----------------------------------------- Signature Date
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING AT A RATE EQUAL TO THE FOURTH LOWEST RATE APPLICABLE TO ORDINARY INCOME OF UNMARRIED INDIVIDUALS (FOR PAYMENTS MADE AFTER AUGUST 6, 2001 AND BEFORE JANUARY 1, 2002, THE BACKUP WITHHOLDING RATE IS 30.5%) ON ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 13 14 MANUALLY SIGNED FACSIMILE COPIES OF THE LETTER OF TRANSMITTAL WILL BE ACCEPTED. THE LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT OR DELIVERED BY EACH STOCKHOLDER OF THE COMPANY OR SUCH STOCKHOLDER'S 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: COMPUTERSHARE TRUST COMPANY OF NEW YORK By Mail: By Overnight Delivery: By Hand: Wall Street Station Wall Street Plaza Wall Street Plaza P.O. Box 1010 88 Pine Street, 19th Floor 88 Pine Street, 19th Floor New York, NY 10268-1010 New York, NY 10005 New York, NY 10005
By Facsimile Transmission: (For Eligible Institutions Only) (212) 701-7636 Confirm Facsimile by Telephone: (212) 701-7624 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 below. Requests for additional copies of the Offer to Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery and all other tender offer materials may be directed to the Information Agent as set forth below and will be furnished promptly at the Purchaser's expense. Stockholders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer is: D. F. KING & CO., INC. 77 Water Street New York, New York 10005 Banks and Brokers Call Collect: (212) 269-5550 All Others Call Toll-Free: (800) 549-6650 The Dealer Manager for the Offer is: SALOMON SMITH BARNEY 388 Greenwich Street New York, New York 10013 Call Toll-Free: (877) 446-1850
EX-99.(A)(3) 5 d90566ex99-a3.txt FORM OF NOTICE OF GUARANTEED DELIVERY 1 NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE PREFERRED STOCK) OF GAYLORD CONTAINER CORPORATION TO TEMPLE-INLAND ACQUISITION CORPORATION AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF TEMPLE-INLAND INC. (NOT TO BE USED FOR SIGNATURE GUARANTEES) THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, OCTOBER 26, 2001, UNLESS THE OFFER IS EXTENDED. This Notice of Guaranteed Delivery, or a form substantially equivalent hereto, must be used to accept the Offer (as defined below) if certificates for Shares (as defined below) are not immediately available, 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 Computershare Trust Company of New York (the "Depositary") on or prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase). This Notice of Guaranteed Delivery may be delivered by hand, transmitted by facsimile transmission or mailed to the Depositary. See Section 3 of the Offer to Purchase. The Depositary for the Offer is: COMPUTERSHARE TRUST COMPANY OF NEW YORK By Mail: By Overnight Delivery: By Hand: Wall Street Station Wall Street Plaza Wall Street Plaza P.O. Box 1010 88 Pine Street, 19th Floor 88 Pine Street, 19th Floor New York, NY 10268-1010 New York, NY 10005 New York, NY 10005 By Facsimile Transmission: (For Eligible Institutions Only) (212) 701-7636 Confirm Facsimile by Telephone: (212) 701-7624
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS BY FACSIMILE OTHER THAN TO THE FACSIMILE NUMBER SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY. THIS NOTICE OF GUARANTEED DELIVERY TO THE DEPOSITARY 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" (AS DEFINED IN INSTRUCTION 1 TO THE LETTER OF TRANSMITTAL) 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 3 of the Offer to Purchase) and certificates for Shares to the Depositary within the time period shown herein. Failure to do so could result in a financial loss to such Eligible Institution. 2 THE GUARANTEE ON THE FOLLOWING PAGE MUST BE COMPLETED. Ladies and Gentlemen: The undersigned hereby tenders to Temple-Inland Acquisition Corporation, a Delaware corporation and an indirect, wholly-owned subsidiary of Temple-Inland Inc., a Delaware corporation, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated September 28, 2001 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with any amendments or supplements thereto, constitute the "Offer"), receipt of which is hereby acknowledged, the number of shares of Class A Common Stock, par value $.0001 per share (the "Common Stock"), of Gaylord Container Corporation, a Delaware corporation, including the associated rights to purchase preferred stock issued pursuant to the Rights Agreement (as defined in the Offer to Purchase) (the "Rights" and, together with the Common Stock, the "Shares"), set forth below, pursuant to the guaranteed delivery procedures set forth in the Offer to Purchase. Number of Shares Tendered: --------------------------- SIGN HERE Certificate No(s) (if available): Name(s) of Record Holder(s): --------------------------------------------- --------------------------------------------- --------------------------------------------- --------------------------------------------- (please type or print) [ ] Check if Shares will be tendered by book-entry transfer Address(es): Name of Tendering Institution: --------------------------------------------- --------------------------------------------- --------------------------------------------- (Zip Code) Account No.: --------------------------- Dated: -----------------------------------------, 2001 --------------------------------------------- Area Code and Telephone No(s): --------------------------------------------- --------------------------------------------- Signature(s)
2 3 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a bank, broker, dealer, credit union, savings association or other entity that is a member in good standing of the Securities Transfer Agents Medallion Program, the New York Stock Exchange Medallion Program or the Stock Exchange Medallion Program guarantees to deliver to the Depositary either the certificates evidencing the Shares tendered hereby, in proper form for transfer, or confirmation of book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company, in either case together with the Letter of Transmittal (or a facsimile thereof) properly completed and duly executed, with any required signature guarantees or an Agent's Message (as defined in Section 3 of the Offer to Purchase) in the case of a book-entry delivery, and any other required documents, all within three New York Stock Exchange trading days after the date hereof. Name of Firm: --------------------------- ------------------------------------------ (Authorized Signature) Address: --------------------------- Title: --------------------------- Name: --------------------------- ------------------------------------------ Zip Code ------------------------------------------ (Please type or print) Date: Area Code and Tel. ---------------------------------------, No.: --------------------------- 2001
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED DELIVERY. CERTIFICATES FOR SHARES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. 3
EX-99.(A)(4) 6 d90566ex99-a4.txt FORM OF LETTER TO BROKERS, DEALERS, AND OTHERS 1 [Logo of Salomon Smith Barney] OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE PREFERRED STOCK) OF GAYLORD CONTAINER CORPORATION BY TEMPLE-INLAND ACQUISITION CORPORATION AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF TEMPLE-INLAND INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, OCTOBER 26, 2001, UNLESS THE OFFER IS EXTENDED. September 28, 2001 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by Temple-Inland Acquisition Corporation, a Delaware corporation (the "Purchaser") and an indirect, wholly-owned subsidiary of Temple-Inland Inc., a Delaware corporation (the "Parent"), to act as Dealer Manager in connection with the Purchaser's offer to purchase all outstanding shares of Class A Common Stock, par value $.0001 per share (the "Common Stock"), of Gaylord Container Corporation, a Delaware corporation (the "Company"), including the associated rights to purchase preferred stock issued pursuant to the Rights Agreement (as defined in the Offer to Purchase) (the "Rights" and, together with the Common Stock, the "Shares"), at a purchase price of $1.80 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 September 28, 2001 (the "Offer to Purchase"), and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer") enclosed herewith. Holders of Shares whose certificates for such Shares (the "Share Certificates") are not immediately available, who cannot complete the procedures for book-entry transfer on a timely basis, or who cannot deliver all other required documents to Computershare Trust Company of New York (the "Depositary") 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 3 of the Offer to Purchase. The Offer is conditioned upon, among other things, (1) there being validly tendered in accordance with the terms of the Offer and not withdrawn prior to the Expiration Date that number of Shares that, together with the Shares then owned by the Parent and the Purchaser, represents at least two-thirds of the outstanding Shares, on a fully diluted basis (as defined in the Offer to Purchase), (2) the receipt by the Depositary of the valid and unwithdrawn tender of the Company's 9 3/8% Senior Notes due 2007, 9 3/4% Senior Notes due 2007 and 9 7/8% Senior Subordinated Notes due 2008 (collectively, the "Notes") (and related consents) representing at least 90% in aggregate principal amount of the outstanding Notes of each series, pursuant to the Parent's, or its designee's, separate tender offers for such Notes, and (3) the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the regulations thereunder having expired or been terminated. The Offer is subject to certain other conditions set forth in the Offer to Purchase. Please read the Introduction and Sections 1 and 15 of the Offer to Purchase, which set forth in full the conditions to the Offer. 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. 2 Enclosed for your information and use are copies of the following documents: 1. Offer to Purchase, dated September 28, 2001; 2. Letter of Transmittal for your use in accepting the Offer and tendering Shares and for the information of your clients (manually signed facsimile copies of the Letter of Transmittal may be used to tender Shares); 3. Notice of Guaranteed Delivery to be used to accept the Offer if Share Certificates are not immediately available or if such certificates and all other required documents cannot be delivered to the Depositary, or if the procedures for book-entry transfer cannot be completed on a timely basis; 4. The letter to stockholders of the Company from Marvin A. Pomerantz, Chairman of the Board and Chief Executive Officer of the Company, together with a Solicitation/Recommendation Statement on Schedule 14D-9 filed with the Securities and Exchange Commission by the Company, which includes the recommendation of the Board of Directors of the Company that stockholders accept the Offer and tender their Shares to the Purchaser pursuant to the Offer; 5. A printed form of letter that may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer; 6. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9; and 7. Return envelope addressed to the Depositary. The Company's Board of Directors has unanimously (1) determined that the terms of the Offer and the Merger (as defined below) are fair to, and in the best interests of, the stockholders of the Company, (2) approved the Offer, the Merger and the Merger Agreement (as defined below), and (3) recommends that the Company's stockholders accept the Offer, tender their Shares pursuant to the Offer and approve and adopt the Merger Agreement and the Merger. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of September 27, 2001 (the "Merger Agreement"), among the Parent, the Purchaser and the Company. The Merger Agreement provides, among other things, that the Purchaser will be merged with and into the Company (the "Merger") as soon as practicable following the satisfaction or waiver of each of the conditions to the Merger set forth in the Merger Agreement. Following the Merger, the Company will continue as the surviving corporation, indirectly wholly-owned by the Parent, and the separate corporate existence of the Purchaser will cease. In order to take advantage of the Offer, (i) a duly executed and properly completed Letter of Transmittal and any required signature guarantees, or an Agent's Message (as defined in Section 3 of the Offer to Purchase) in connection with a book-entry delivery of Shares, and other required documents should be sent to the Depositary and (ii) Share Certificates representing the tendered Shares should be delivered to the Depositary, or such Shares should be tendered by book-entry transfer into the Depositary's account maintained at The Depository Trust Company, all in accordance with the instructions set forth in the Letter of Transmittal and the Offer to Purchase. If holders of Shares wish to tender, but it is impracticable for them to forward their Share Certificates or other required documents prior to the Expiration Date or to comply with the book-entry transfer procedures on a timely basis, a tender may be effected by following the guaranteed delivery procedures specified in Section 3 of the Offer to Purchase. The Purchaser will not pay any fees or commissions to any broker or dealer or other person (other than the Depositary, the Information Agent and the Dealer Manager as described in the Offer to Purchase) for soliciting tenders of Shares pursuant to the Offer. The Purchaser will, however, upon request, reimburse you for customary mailing and handling costs incurred by you in forwarding the enclosed materials to your customers. 2 3 The Purchaser will pay or cause to be paid all stock transfer taxes applicable to its purchase of Shares pursuant to the Offer, except as otherwise provided in Instruction 6 of the Letter of Transmittal. 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 FRIDAY, OCTOBER 26, 2001, UNLESS THE OFFER IS EXTENDED. Any inquiries you may have with respect to the Offer should be addressed to, and additional copies of the enclosed materials may be obtained from, the Information Agent or the undersigned at the addresses and telephone numbers set forth on the back cover of the Offer to Purchase. Very truly yours, SALOMON SMITH BARNEY INC. NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AS AN AGENT OF THE PARENT, THE PURCHASER, THE COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT, THE DEPOSITARY OR ANY AFFILIATE OF ANY OF THE FOREGOING OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. Enclosures 3 EX-99.(A)(5) 7 d90566ex99-a5.txt FORM OF LETER TO CLIENTS FOR USE BY BROKERS 1 OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE PREFERRED STOCK) OF GAYLORD CONTAINER CORPORATION BY TEMPLE-INLAND ACQUISITION CORPORATION AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF TEMPLE-INLAND INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT NEW YORK CITY TIME, ON FRIDAY, OCTOBER 26, 2001, UNLESS THE OFFER IS EXTENDED. To Our Clients: Enclosed for your consideration are the Offer to Purchase, dated September 28, 2001 (the "Offer to Purchase"), and a related Letter of Transmittal (the "Letter of Transmittal" which, together with the Offer to Purchase and any amendments or supplements thereto, collectively constitute the "Offer") in connection with the offer by Temple-Inland Acquisition Corporation, a Delaware corporation (the "Purchaser") and an indirect, wholly-owned subsidiary of Temple-Inland Inc. (the "Parent"), a Delaware corporation, to purchase all outstanding shares of Class A Common Stock, par value $.0001 per share (the "Common Stock"), of Gaylord Container Corporation, a Delaware corporation (the "Company"), including the associated rights to purchase preferred stock issued pursuant to the Rights Agreement (as defined in the Offer to Purchase) (the "Rights" and, together with the Common Stock, the "Shares"), at a purchase price of $1.80 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 and the Letter of Transmittal enclosed herewith. WE, OR OUR NOMINEES, ARE THE HOLDER OF RECORD 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 ENCLOSED LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES THAT ARE HELD BY US FOR YOUR ACCOUNT. We request instructions as to whether you wish us to tender any or all of the Shares held by us for your account, upon the terms and subject to the conditions set forth in the Offer to Purchase. Your attention is invited to the following: 1. The offer price is $1.80 per Share, net to you in cash, without interest thereon. 2. The Offer is being made for all outstanding Shares. 3. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of September 27, 2001 (the "Merger Agreement") among the Parent, the Purchaser and the Company. The Merger Agreement provides, among other things, that the 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. 4. The Company's Board of Directors has unanimously (1) determined that the terms of the Offer and the Merger are fair to, and in the best interests of, the stockholders of the Company, 2 (2) approved the Offer, the Merger and the Merger Agreement, and (3) recommends that the Company's stockholders accept the Offer, tender their Shares pursuant to the Offer and approve and adopt the Merger Agreement and the Merger. 5. The Offer and withdrawal rights will expire at 12:00 midnight, New York City time, on October 26, 2001 (the "Expiration Date"), unless the Offer is extended. 6. Any stock transfer taxes applicable to the sale of Shares to the Purchaser pursuant to the Offer will be paid by the Purchaser, except as otherwise provided in Instruction 6 of the Letter of Transmittal. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY TENDERED IN ACCORDANCE WITH THE TERMS OF THE OFFER AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE THAT NUMBER OF SHARES THAT, TOGETHER WITH THE SHARES THEN OWNED BY THE PARENT AND THE PURCHASER, REPRESENTS AT LEAST TWO-THIRDS OF THE OUTSTANDING SHARES, ON A FULLY DILUTED BASIS (AS DEFINED IN THE OFFER TO PURCHASE), (2) THE RECEIPT BY COMPUTERSHARE TRUST COMPANY OF NEW YORK (THE "DEPOSITARY") OF THE VALID AND UNWITHDRAWN TENDER OF THE COMPANY'S 9 3/8% SENIOR NOTES DUE 2007, 9 3/4% SENIOR NOTES DUE 2007 AND 9 7/8% SENIOR SUBORDINATED NOTES DUE 2008 (COLLECTIVELY, THE "NOTES") (AND RELATED CONSENTS) REPRESENTING AT LEAST 90% IN AGGREGATE PRINCIPAL AMOUNT OF THE OUTSTANDING NOTES OF EACH SERIES, PURSUANT TO THE PARENT'S, OR ITS DESIGNEE'S, SEPARATE TENDER OFFERS FOR SUCH NOTES, AND (3) THE WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED, AND THE REGULATIONS THEREUNDER HAVING EXPIRED OR BEEN TERMINATED. THE OFFER IS SUBJECT TO CERTAIN OTHER CONDITIONS SET FORTH IN THE OFFER TO PURCHASE. PLEASE READ THE INTRODUCTION AND SECTIONS 1 AND 15 OF THE OFFER TO PURCHASE, WHICH SET FORTH IN FULL THE CONDITIONS TO THE OFFER. The Offer is made solely by the Offer to Purchase and the related Letter of Transmittal and is being made to all holders of Shares. The 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 the Purchaser becomes aware of any valid state statute prohibiting the making of the Offer or the acceptance of Shares pursuant thereto, the Purchaser shall make a good faith effort to comply with such state statute or seek to have such statute declared inapplicable to the Offer. If, after such good faith effort, the Purchaser cannot comply with such state statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) holders of Shares in such state. In those jurisdictions 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 the Purchaser by Salomon Smith Barney Inc. in its capacity as Dealer Manager for the Offer or one or more registered brokers or dealers licensed under the laws of such jurisdiction. If you wish to have us tender any or all of your Shares, please so instruct us by completing, executing and returning to us the instruction form set forth on the reverse side of this letter. An envelope to return your instructions to us is also enclosed. If you authorize the tender of your Shares, all of your Shares will be tendered unless otherwise specified on the reverse side of this letter. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION DATE. 2 3 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 GAYLORD CONTAINER CORPORATION BY TEMPLE-INLAND ACQUISITION CORPORATION AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF TEMPLE-INLAND INC. The undersigned acknowledges receipt of your letter and the enclosed Offer to Purchase, dated September 28, 2001, and the related Letter of Transmittal in connection with the Offer by Temple-Inland Acquisition Corporation, a Delaware corporation and an indirect, wholly-owned subsidiary of Temple-Inland Inc., a Delaware corporation, to purchase all outstanding shares of Class A Common Stock, par value $.0001 per share (the "Common Stock"), of Gaylord Container Corporation, a Delaware corporation (the "Company"), including the associated rights to purchase preferred stock issued pursuant to the Rights Agreement (as defined in the Offer to Purchase) (the "Rights" and, together with the Common Stock, the "Shares") at a purchase price of $1.80 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 and the related Letter of Transmittal. This will instruct you to tender to the Purchaser the number of Shares indicated below (or, if no number is indicated below, all Shares) that are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer to Purchase and the related Letter of Transmittal. Number of Shares to Be Tendered:* ------------------------------ Account No.: ----------------------------------------- Dated: ----------------------------------------- , 2001 SIGN HERE ----------------------------------------- ----------------------------------------- Signature(s) ----------------------------------------- ----------------------------------------- ----------------------------------------- ----------------------------------------- Print Name(s)and Address(es) ----------------------------------------- ----------------------------------------- ----------------------------------------- Area Code and Telephone Number(s) ----------------------------------------- Taxpayer Identification or Social Security Number(s) --------------- * Unless a specific contrary instruction is given in the space provided, your signature(s) hereon shall constitute an instruction to us to tender all Shares held by us for your account. 3 EX-99.(A)(6) 8 d90566ex99-a6.txt GUIDELINES FOR CERTIFICATION OF TAXPAYER ID 1 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. 00-0000000. The table below will help determine the number to give the payer. ------------------------------------------------------------ GIVE THE FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY NUMBER OF-- ------------------------------------------------------------ 1. An individual's account The individual 2. Two or more individuals (joint The actual owner of account) the account or, if combined funds, the first individual on the account 3. Husband and wife (joint account) The actual owner of the account or, if joint funds, either person(1) 4. Custodian account of a minor The minor(2) (Uniform Gift to Minors Act) 5. Adult and minor (joint account) The adult or, if the minor is the only contributor, the minor(1) 6. Account in the name of guardian or The ward, minor, or committee for a designated ward, incompetent minor, or incompetent person person(3) 7. a. The usual revocable savings The grantor- trust account (grantor is also trustee(1) trustee) b. So-called trust account that is The actual owner(1) not a legal or valid trust under State law 8. Sole proprietorship account The Owner(4) ------------------------------------------------------------ ------------------------------------------------------------ GIVE THE EMPLOYER FOR THIS TYPE OF ACCOUNT: IDENTIFICATION NUMBER OF-- ------------------------------------------------------------ 9. A valid trust, estate, or pension Legal entity (Do trust not 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, charitable, or The organization educational organization account 12. Partnership account held in the The partnership name of the business 13. Association, club, or other tax- The organization exempt organization 14. A broker or registered nominee The broker or nominee 15. Account with the Department of The public entity 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. (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. 2 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 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'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 covenant 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. IF YOU ARE A NONRESIDENT ALIEN OR A FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A COMPLETED INTERNAL REVENUE SERVICE FORM W-8BEN OR FORM W-8ECI, AS APPLICABLE. 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 NOTICE.--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. Beginning January 1, 1993, payers must generally withhold 30.5% (subject to adjustment in future years) 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 NUMBER.--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) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to include any portion of an includible payment for interest, dividends, or patronage dividends in gross income, such failure will be treated as being due to negligence and will be subject to a penalty of 5% on any portion of an under-payment attributable to that failure unless there is clear and convincing evidence to the contrary. (3) 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. (4) 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)(7) 9 d90566ex99-a7.txt JOINT PRESS RELEASE ISSUED BY THE PARENT 1 TEMPLE-INLAND INC. TO ACQUIRE GAYLORD CONTAINER CORPORATION AUSTIN, TEXAS, September 27, 2001 -- Temple-Inland Inc. ("Temple-Inland") and Gaylord Container Corporation ("Gaylord") today announced the signing of a definitive merger agreement by which Temple-Inland will acquire Gaylord. Pursuant to the terms of the agreement, Temple-Inland will begin cross-conditional tender offers for all of Gaylord's outstanding shares and outstanding 9-3/8% Senior Notes due 2007 (the "9-3/8% Senior Notes"), 9-3/4% Senior Notes due 2007 (the "9-3/4% Senior Notes"), and 9-7/8% Senior Subordinated Notes due 2008 (the "9-7/8% Senior Subordinated Notes" and, collectively with the 9-3/8% Senior Notes and the 9-3/4% Senior Notes, the "Notes"). Certain outstanding bank debt and other senior secured debt obligations of Gaylord will be paid or otherwise satisfied. Assuming that all shares and all Notes are tendered, the total consideration for the transaction is approximately $786 million, consisting of $1.80 per share, or approximately $100 million, to purchase the outstanding shares of Gaylord, and approximately $686 million to acquire all the Notes and to satisfy the bank debt and other senior secured debt obligations. This transaction is contingent upon, among other things: (i) at least two-thirds of the outstanding shares of Gaylord being validly tendered and not withdrawn prior to the expiration date of the offer, and (ii) at least 90% in aggregate principal amount of the outstanding Notes of each series being validly tendered and not withdrawn prior to the expiration of the offer. The transaction is also subject to regulatory approval and satisfaction or waiver of customary closing conditions. This transaction is not conditioned upon financing. Temple-Inland has received a financing commitment from Citibank, N.A. to fund its offer for all outstanding shares of Gaylord, to acquire all the Notes, to satisfy the bank debt and other senior secured debt obligations, and to pay costs and expenses associated with the transaction. The tender offers for the outstanding stock and for the Notes are both scheduled to expire on October 26, 2001, but one or both may be extended by Temple-Inland under certain conditions. In announcing the transaction, Kenneth M. Jastrow, II, chairman and chief executive officer of Temple-Inland said, "The addition of Gaylord will extend our market reach, add to our customer base and provide increased operational efficiency. In addition, this acquisition enhances our industry position and furthers our strategic objective to grow our company with the addition of high-quality assets." Marvin Pomerantz, chairman and chief executive officer of Gaylord stated, "We are very pleased that our outstanding operating team will be joining forces with one of the industry's premier companies. The combination of our two companies will create an organization that will be among the very best in the industry." Pursuant to the terms of the merger agreement, a subsidiary of Temple-Inland will commence a tender offer to purchase all of the outstanding shares of Gaylord at a price of $1.80 per share in cash. Gaylord's Board of Directors has unanimously recommended that its shareholders accept the offer and tender their shares. Gaylord's Board of Directors has received 2 fairness opinions from Deutsche Banc Alex. Brown Inc. and Rothschild Inc., its financial advisors, stating that the consideration to be received by Gaylord's shareholders is fair from a financial point of view to such shareholders. A subsidiary of Temple-Inland will also commence a cash tender offer and consent solicitation for each series of Notes. The purchase price per $1,000 in principal amount of Notes is equal to the amount indicated in the table below. In addition, if a Note is tendered prior to the consent payment deadline and not withdrawn, a consent payment in the amount indicated in the table below will be paid to the holder of the Note. The consent payment deadline is 12:00 midnight, New York City time, on October 12, 2001. The consent solicitation seeks consent from the holders of each series of Notes to amend the indentures governing the Notes to eliminate certain restrictive covenants and other contractual obligations of Gaylord. Salomon Smith Barney Inc. will act as dealer/manager for Temple-Inland in connection with the Notes tender offer.
Purchase Price (per Consent Payment $1,000 principal (per $1,000 principal Series of Notes amount) amount) Total --------------- ------------------- --------------------- ----- 9-3/8% Senior Notes due 2007 $735 $20 $755 9-3/4% Senior Notes due 2007 $735 $20 $755 9-7/8% Senior Subordinated Notes $240 $20 $260 due 2008
GAYLORD SHAREHOLDERS ARE ADVISED TO READ THE OFFER TO PURCHASE REFERENCED IN THIS PRESS RELEASE, WHICH WILL BE FILED BY TEMPLE-INLAND AND THE ACQUISITION SUBSIDIARY WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION (THE "COMMISSION") AND THE RELATED SOLICITATION/RECOMMENDATION STATEMENT THAT WILL BE FILED BY GAYLORD WITH THE COMMISSION. THE OFFER TO PURCHASE AND RELATED TENDER OFFER DOCUMENTS AND THE SOLICITATION/RECOMMENDATION STATEMENT WILL BE MAILED TO GAYLORD SHAREHOLDERS AND WILL CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER FOR THE STOCK. THESE DOCUMENTS WILL BE MADE AVAILABLE TO ALL SHAREHOLDERS OF GAYLORD, AT NO EXPENSE TO THEM, BY CONTACTING THE INFORMATION AGENT, D. F. KING & CO., INC. BANKERS AND BROKERS PLEASE CALL COLLECT AT (212) 269-5550 AND ALL OTHERS PLEASE CALL TOLL FREE AT (800) 549-6650. HOLDERS OF THE NOTES ARE ADVISED TO READ THE OFFER TO PURCHASE AND CONSENT SOLICITATION STATEMENT RELATING TO THE NOTES TENDER OFFER. THE OFFER TO PURCHASE AND CONSENT SOLICITATION STATEMENT WILL BE MAILED TO HOLDERS OF NOTES AND WILL CONTAIN IMPORTANT INFORMATION 3 THAT SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER FOR THE NOTES. THESE DOCUMENTS WILL BE MADE AVAILABLE TO ALL HOLDERS OF THE NOTES, AT NO EXPENSE TO THEM, BY CONTACTING THE INFORMATION AGENT, D. F. KING & CO., INC. BANKERS AND BROKERS PLEASE CALL COLLECT AT (212) 269-5550 AND ALL OTHERS PLEASE CALL TOLL FREE AT (800) 549-6650. CERTAIN OF THESE DOCUMENTS ALSO WILL BE AVAILABLE AT NO CHARGE AT THE SEC'S WEBSITE AT HTTP://WWW.SEC.GOV. During the tender period, Temple-Inland and Gaylord are unable to make any comment beyond the information contained in the publicly available documents that will be filed with the Commission. Subsequent to the expiration of the tender period, Temple-Inland will host a meeting for the investment community in New York City, which will also be accessible via web cast and conference call. Details of such meeting will be provided at a later time. Temple-Inland is a major manufacturer of corrugated packaging and building products, with a diversified financial services operation. The company's 2.2 million acres of forestland are certified as managed in compliance with ISO 14001 and in accordance with the Sustainable Forestry Initiative (SFI(SM)) program of the American Forest & Paper Association to ensure forest management is conducted in a scientifically sound and environmentally sensitive manner. Temple-Inland's common stock (TIN) is traded on the New York Stock Exchange and the Pacific Exchange. Temple-Inland's address on the World Wide Web is http://www.templeinland.com. Gaylord is a national major manufacturer and distributor of brown paper packaging products including corrugated containers and sheets, multiwall and retail bags, containerboard and unbleached kraft paper. Gaylord's common stock (GCR) is traded on the American Stock Exchange. Gaylord's address on the World Wide Web is http://www.gaylordcontainer.com. This announcement is not an offer to purchase, a solicitation of an offer to purchase, or a solicitation of consents with respect to the common stock or Notes of Gaylord. The tender offer for the common stock is being made solely by the Offer to Purchase dated September 28, 2001. The tender offer and consent solicitation for the Notes is being made solely by the Offer to Purchase and Consent Solicitation dated September 28, 2001. This release contains forward-looking statements that involve risks and uncertainties. The actual results achieved by Temple-Inland or Gaylord may differ significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include general economic, market, or business conditions; the opportunities (or lack thereof) that may be presented to and pursued by Temple-Inland and Gaylord and their respective subsidiaries; competitive actions by other companies; changes in laws or regulations; and other factors, many of which are beyond the control of Temple-Inland and Gaylord and their respective subsidiaries. 4 Investor Contacts Doyle R. Simons Vice President, Administration Temple-Inland Inc. 512-434-3737 Richard E. Storat Director, Corporate Affairs Gaylord Container Corporation 847-405-5645
EX-99.(A)(8) 10 d90566ex99-a8.txt FORM OF SUMMARY ADVERTISEMENT-WALL STREET JOURNAL 1 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 September 28, 2001, and the related Letter of Transmittal (and any amendments or supplements thereto), and is being made to all holders of Shares. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction where the making of the Offer or the acceptance thereof would not be in compliance with the securities, "blue sky" or other laws of such jurisdiction. 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 Temple-Inland Acquisition Corporation by Salomon Smith Barney or 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 GAYLORD CONTAINER CORPORATION AT $1.80 NET PER SHARE IN CASH BY TEMPLE-INLAND ACQUISITION CORPORATION AN INDIRECT, WHOLLY-OWNED SUBSIDIARY OF TEMPLE-INLAND INC. Temple-Inland Acquisition Corporation, a Delaware corporation (the "Purchaser") and an indirect, wholly-owned subsidiary of Temple-Inland Inc., a Delaware corporation ("Parent"), is offering to purchase all outstanding shares of Class A Common Stock, par value $.0001 per share (the "Common Stock"), of Gaylord Container Corporation, a Delaware corporation (the "Company"), together with the associated rights to purchase preferred stock issued pursuant to the Rights Agreement (as defined in the Offer to Purchase) (the "Rights" and, together with the Common Stock, the "Shares"), at a price of $1.80 per Share, net to the seller in cash, without interest thereon (the "Offer Price"), upon the terms and subject to the conditions set forth in the Offer to Purchase, dated September 28, 2001 (the "Offer to Purchase"), and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). Following consummation of the Offer, the Purchaser intends to effect the Merger described below. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON FRIDAY, OCTOBER 26, 2001, UNLESS THE OFFER IS EXTENDED. The Offer is conditioned upon, among other things, (1) there being validly tendered in accordance with the terms of the Offer and not withdrawn prior to the Expiration Date (as defined below) that number of Shares that, together with the Shares then owned by Parent and the Purchaser, represents at least two-thirds of the then outstanding Shares on a fully diluted basis (the "Minimum Stock Condition"), (2) the receipt by Computershare Trust Company of New York (the "Depositary") of the valid and unwithdrawn tender of the Company's 9 3/8% Senior Notes due 2007, 9 3/4% Senior Notes due 2007 and 9 7/8% Senior Subordinated Notes due 2008 (collectively, the "Notes") (and related consents) representing at least 90% in aggregate principal amount of the outstanding Notes of each series (the "Minimum Note Condition"), pursuant to Parent's, or its designee's, separate tender offers for such Notes, and (3) the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as 2 amended, and the regulations thereunder, having expired or been terminated (the "HSR Condition"). The Offer is also subject to other terms and conditions set forth in the Offer to Purchase. The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of September 27, 2001 (the "Merger Agreement"), among Parent, the Purchaser and the Company. The Merger Agreement provides, among other things, that the Purchaser will be merged (the "Merger") with and into the Company. At the effective time of the Merger (the "Effective Time"), the Company will continue as the surviving corporation, indirectly wholly-owned by Parent. Pursuant to the Merger, each Share outstanding immediately prior to the Effective Time (other than Shares owned beneficially or of record by Parent or any subsidiary of Parent or held in the treasury of the Company, all of which will be canceled, and other than Shares that are held by stockholders, if any, who properly exercise their dissenters' rights under the Delaware General Corporation Law), shall be converted into the right to receive the per Share price paid in the Offer in cash, without interest. As a condition and inducement to Parent's and the Purchaser's entering into the Merger Agreement, certain stockholders of the Company (each a "Stockholder") who have voting power and dispositive power with respect to an aggregate of 6,672,480 Shares, representing approximately 11.9% of the Shares outstanding on September 26, 2001, concurrently with the execution and delivery of the Merger Agreement entered into a Stockholders Agreement (the "Stockholders Agreement"), dated as of September 27, 2001, with Parent and the Purchaser. Pursuant to the Stockholders Agreement, each of the Stockholders has agreed, among other things, to validly tender into the Offer promptly, all Shares subject to the Stockholders Agreement, and to grant Parent an irrevocable proxy with respect to the voting of such Shares in favor of the Merger, upon the terms and subject to the conditions set forth in the Stockholders Agreement. In addition, as a condition and inducement to Parent's and the Purchaser's entering into the Merger Agreement, concurrently with the execution and delivery of the Merger Agreement, the Company and Parent entered into a Stock Option Agreement, dated as of September 27, 2001 (the "Option Agreement"), pursuant to which, among other things, the Company granted Parent an irrevocable option (the "Option") to purchase up to such number of newly-issued Shares as is equal to 19.9% of the Shares outstanding on the date of exercise of the Option at a purchase price per Share of $1.80, subject to the terms and conditions set forth in the Option Agreement. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY (1) DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY, (2) APPROVED THE OFFER, THE MERGER AND THE MERGER AGREEMENT AND (3) RECOMMENDS THAT THE COMPANY'S STOCK-HOLDERS ACCEPT THE OFFER, TENDER THEIR SHARES PURSUANT TO THE OFFER AND APPROVE AND ADOPT THE MERGER AGREEMENT AND THE MERGER. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not properly withdrawn as, if and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance for payment of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the Offer Price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payments from the Purchaser and transmitting such payments to tendering stockholders whose Shares have been accepted for payment. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (1) the certificates evidencing such Shares (the "Share Certificates") or confirmation of a book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in the Offer to Purchase, (2) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees or, in the case of a book-entry transfer, an Agent's Message (as defined in the Offer to Purchase) in lieu of the Letter of Transmittal and (3) any other documents required under the Letter of Transmittal. Subject to the terms of the Merger Agreement, the Purchaser may, without the consent of the Company, extend the Offer beyond the scheduled Expiration Date if any of the conditions to the Purchaser's obligation to accept for payment and to pay for the Shares shall not be satisfied or, to the extent permitted by the Merger Agreement, waived. The Purchaser, however, may not extend the Offer beyond December 28, 2001 without the consent of the Company, except that Parent may extend the Expiration Date after December 28, 2001 as required to comply with any rule, regulation or interpretation of the Securities and Exchange Commission (the "SEC"). The term "Expiration Date" means 12:00 midnight, New York City time, on October 26, 2001, unless the Purchaser, in accordance with the Merger Agreement, extends the period during which the Offer is open, in which event the term "Expiration 3 Date" means the latest time and date on which the Offer, as so extended, expires. Pursuant to Rule 14d-11 under the Exchange Act, the 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 business days to 20 business days in length, beginning after the Purchaser purchases Shares tendered in the Offer, during which stockholders may tender, but not withdraw, their Shares and receive the Offer Price. 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. There can be no assurance that the Purchaser will provide a Subsequent Offering Period. Subject to the applicable rules and regulations of the SEC and the provisions of the Merger Agreement, the Purchaser also expressly reserves the right, in its sole discretion, at any time or from time to time, (1) to terminate the Offer if any of the conditions set forth in Section 15 of the Offer to Purchase has not been satisfied and (2) to waive any condition to the Offer (other than the Minimum Stock 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. Any extension, delay, termination, waiver or amendment will be followed as promptly as practicable by public announcement thereof. Such announcement in the case of an extension will be made 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. Tendering stockholders who are record owners of their Shares and tender directly to the Depositary will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes with respect to the purchase of Shares by the Purchaser pursuant to the Offer. Stockholders who hold their Shares through a broker, dealer, commercial bank, trust company or other nominee should consult such institution as to whether it charges any service fees. Parent or the Purchaser will pay all charges and expenses of the Depositary, Salomon Smith Barney, which is acting as Dealer Manager for the Offer (the "Dealer Manager") and D. F. King & Co., Inc., which is acting as Information Agent for the Offer (the "Information Agent"), incurred in connection with the Offer. Tenders of Shares made pursuant to the Offer are irrevocable, except that such Shares may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment by the Purchaser pursuant to the Offer, may also be withdrawn at any time after November 26, 2001 (or such later date as may apply if the Offer is extended). However, Shares tendered in any Subsequent Offering Period may not be withdrawn. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover page of the Offer to Purchase. Any such notice of withdrawal must specify the name, address and taxpayer identification number of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of such Shares, if different from that of the person who tendered such Shares. If Share Certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such Share Certificates, the serial numbers shown on such Share Certificates must be submitted to the Depositary and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution (as defined in the Offer to Purchase), unless such Shares have been tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer as set forth in Section 3 of the Offer to Purchase, any notice of withdrawal must specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares. All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by the Purchaser, in its sole discretion, whose determination will be final and binding. 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. The Company has provided the Purchaser with a list of the stockholders of the Company and security position listings for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase and the related Letter of Transmittal will be mailed to record holders of Shares whose names appear on the Company's stockholder list and will be furnished, for subsequent transmittal to beneficial owners of Shares, to brokers, dealers, commercial banks, trust companies and similar persons whose 4 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. 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. Questions or requests for assistance may be directed to the Information Agent or the Dealer Manager, at the addresses and telephone numbers set forth below. Stockholders may request copies of the Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and related materials from the Information Agent or the Dealer Manager as set forth below, which will be furnished promptly at the Purchaser's expense. Stockholders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. None of Parent or the 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. The Information Agent for the Offer is: D. F. KING & CO., INC. 77 Water Street New York, New York 10005 Banks and Brokers Call Collect: (212) 269-5550 All Others Call Toll-Free: (800) 549-6650 The Dealer Manager for the Offer is: SALOMON SMITH BARNEY 388 Greenwich Street New York, New York 10013 Call Toll-Free: (877) 446-1850 September 28, 2001 EX-99.(B)(1) 11 d90566ex99-b1.txt COMMITMENT LETTER 1 CONFIDENTIAL September 26, 2001 Temple-Inland Inc. 1300 S. Mopac Expressway Austin, TX 78746 Attention: Randall D. Levy, Chief Financial Officer David W. Turpin, Treasurer $900,000,000 364-DAY TERM LOAN FACILITY COMMITMENT LETTER Ladies and Gentlemen: Citibank, N.A. ("Citibank") is pleased to inform Temple-Inland Inc. (the "Company") of Citibank's commitment to provide the Company with the entire amount of the 364-day term loan facility for an aggregate principal amount of up to $900,000,000 (the "Facility") and to act as Administrative Agent for the Facility, subject to the terms and conditions of this letter and the summary of Terms and Conditions set forth in Annex 1 hereto (collectively, and together with the Fee Letter referred to below, the "Commitment Letter"). Capitalized terms not otherwise defined herein shall have the meanings assigned to them in Annex 1. The proceeds of the Facility will be used solely (i) to fund the acquisition of the Target via a tender offer for all the outstanding equity interests of the Target (the "Acquisition") to be made pursuant to an Agreement and Plan of Merger among the Company, the Target and Merger Sub, (ii) to fund the acquisition of certain debt of the Target pursuant to a debt tender offer, (iii) to repay certain of the Target's existing bank debt and other existing debt and (iv) to pay certain acquisition-related fees and expenses, each as more fully described in Annex 1. SECTION 1. CONDITIONS PRECEDENT. Citibank's commitment hereunder is subject to: (i) the preparation, execution and delivery of mutually acceptable definitive loan documentation (the "Operative Documents"); (ii) our completion of, and satisfaction in all respects with, our due diligence investigation of the business, condition (financial or otherwise), operations, performance, properties, prospects and material contracts of the Company and the Company and its subsidiaries, taken as a whole, and the Target and its subsidiaries, taken as a whole; (iii) the absence of (A) any material adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects of the Company or the Company and its subsidiaries, taken as a whole, or any of its operating subsidiaries or the Target and its subsidiaries, taken as a whole, since December 31, 2000, and (B) any circumstance, change or condition in the loan syndication, financial, banking or 1 2 capital markets generally that, in the judgment of Salomon Smith Barney Inc. ("SSBI", and together with Citibank, "Citi/SSBI"), would materially impair the syndication of the Facility; (iv) the recommendation of the Acquisition by the Target's board of directors; (v) the Company's long-term senior unsecured debt rating being no lower than BBB- and Baa3 by Standard & Poor's and Moody's, respectively; (vi) the accuracy and completeness in all material respects of all representations made by the Company to Citibank and all information that the Company furnishes to Citibank; (vii) the Company's compliance with the terms of this Commitment Letter; (viii) the payment in full of all fees, expenses and other amounts payable under this Commitment Letter; (ix) Citi/SSBI having received evidence reasonably satisfactory to it that all conditions to the purchase of Target Debt shall have been satisfied without giving effect to any waiver or amendment thereof not approved by the Lenders, and, in any event, the Company having received acceptances for payment of a sufficient amount of the Target Debt pursuant to the Debt Tender to permit Merger Sub to amend the Target Debt covenants without the vote of any other holders of the Target Debt; and (x) Citi/SSBI having received evidence reasonably satisfactory to it that all conditions to the purchase of Shares pursuant to the Equity Tender shall have been satisfied without giving effect to any waiver or amendment thereof not approved by the Lenders, and, in any event, the Company having received acceptances for purchase of no less than 2/3 of the Shares. SECTION 2. COMMITMENT TERMINATION. Citibank's commitment hereunder will terminate on the earlier of (a) the date the Operative Documents become effective and (b) December 28, 2001. Before such date, Citibank may terminate its commitment hereunder if any event occurs or information becomes available that, in its reasonable judgment, results or is likely to result in the failure to satisfy any condition set forth in Section 1. SECTION 3. SYNDICATION. After initial funding under the Operative Documents, Citibank reserves the right to syndicate all or a portion of its commitment to one or more other financial institutions identified by SSBI and reasonably acceptable to the Company that will become parties to the Operative Documents pursuant to a syndication to be managed exclusively by SSBI (the financial institutions becoming parties to the Operative Documents being collectively referred to herein as the "Lenders"). SSBI will manage all aspects of the syndication in consultation with the Company, including the timing of all offers to potential Lenders, the determination of the amounts offered to potential Lenders, the acceptance of commitments of the Lenders and the compensation to be provided to the Lenders. The Company shall take all action as SSBI may reasonably request to assist SSBI in forming a syndicate acceptable to SSBI and the Company. The Company's assistance in forming such a syndicate shall include but not be limited to (i) making senior management and representatives of the Company and the Target available to 2 3 participate in information meetings with potential Lenders at such times and places as SSBI may reasonably request; (ii) using the Company's best efforts to ensure that the syndication efforts benefit from the Company's and the Target's lending relationships; and (iii) providing SSBI with all information reasonably deemed necessary by it to successfully complete the syndication, which shall include projections and pro forma information. To ensure an effective syndication of the Facility, the Company agrees that until the earlier of (i) termination of the syndication (as determined by SSBI) or (ii) 150 days after initial funding under Operative Documents, the Company will not, and will not permit any of its affiliates to, syndicate or issue, attempt to syndicate or issue, announce or authorize the announcement of the syndication or issuance of, or engage in discussions concerning the syndication or issuance of, any debt facility or debt security (including any renewals thereof) in the commercial bank market, without the prior written consent of SSBI not to be unreasonably withheld; provided, however, that the foregoing shall not limit the Company's ability to issue commercial paper, other short-term debt under programs currently in place, equity or public debt securities. Citibank will act as the sole Administrative Agent for the Facility and SSBI will act as Sole Arranger, Book Manager and Syndication Agent. No additional agents, co-agents or arrangers will be appointed, or other titles conferred, without the consent of SSBI and Citibank. SECTION 4. FEES. In addition to the fees described in Annex I, the Company shall pay the non-refundable fees set forth in that certain letter agreement dated the date hereof (the "Fee Letter") between the Company and Citi/SSBI. The terms of the Fee Letter are an integral part of Citibank's commitment hereunder and constitute part of this Commitment Letter for all purposes hereof. SECTION 5. INDEMNIFICATION. The Company shall indemnify and hold harmless Citi/SSBI, each Lender and each of their respective affiliates and each of their respective officers, directors, employees, agents, advisors and representatives (each, an "Indemnified Party") from and against any and all claims, damages, losses, liabilities and expenses (including, without limitation, reasonable fees and disbursements of counsel), that may be incurred by or asserted or awarded against any Indemnified Party (including, without limitation, in connection with any investigation, litigation or proceeding or the preparation of a defense in connection therewith), in each case arising out of or in connection with or by reason of this Commitment Letter or the Operative Documents or the transactions contemplated hereby or thereby or any actual or proposed use of the proceeds of the Facility, except to the extent such claim, damage, loss, liability or expense resulted from such Indemnified Party's gross negligence or willful misconduct. In the case of an investigation, litigation or other proceeding to which the indemnity in this paragraph applies, such indemnity shall be effective whether or not such investigation, litigation or proceeding is brought by the Company, any of its directors, security holders or creditors, 3 4 an Indemnified Party or any other person or an Indemnified Party is otherwise a party thereto and whether or not the transactions contemplated hereby are consummated. No Indemnified Party shall have any liability (whether in contract, tort or otherwise) to the Company or any of its security holders or creditors for or in connection with the transactions contemplated hereby, except for direct damages (as opposed to special, indirect, consequential or punitive damages (including, without limitation, any loss of profits, business or anticipated savings)) resulting from such Indemnified Party's gross negligence or willful misconduct. SECTION 6. COSTS AND EXPENSES. The Company shall pay, or reimburse Citi/SSBI on demand for, all reasonable out-of-pocket costs and expenses incurred by Citi/SSBI (whether incurred before or after the date hereof) in connection with the Facility and the preparation, negotiation, execution and delivery of this Commitment Letter, including, without limitation, the reasonable fees and expenses of counsel, regardless of whether any of the transactions contemplated hereby are consummated. The Company shall also pay all costs and expenses of Citi/SSBI (including, without limitation, the reasonable fees and disbursements of counsel) incurred in connection with the enforcement of any of its rights and remedies hereunder. SECTION 7. CONFIDENTIALITY. By accepting delivery of this Commitment Letter, the Company agrees that this Commitment Letter is for the Company's confidential use only and that neither its existence nor the terms hereof will be disclosed by the Company to any person other than the Company's officers, directors, employees, accountants, attorneys and other advisors, and then only on a confidential and "need to know" basis in connection with the transactions contemplated hereby; provided, however, that (i) following its acceptance hereof, the Company may disclose this letter (but not the Fee Letter or the contents thereof) to the Target on a confidential basis in connection with the Acquisition and (ii) the Company may make such other public disclosures of the terms and conditions hereof as the Company is required by law, in the opinion of the Company's counsel, to make (it being understood that this Section 7 shall not apply to this Commitment Letter and the terms hereof to the extent this Commitment Letter and such terms are disclosed in any public filing pursuant to clause (ii) of this Section 7). SECTION 8. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants that (i) all information that has been or will hereafter be made available to Citi/SSBI, any Lender or any potential Lender by the Company or any of its affiliates or representatives in connection with the transactions contemplated hereby does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not misleading in light of the circumstances under which such statements were or are made and (ii) all financial projections that have been or will be prepared by the Company and made available to Citi/SSBI, any Lender or any potential Lender have been or will be prepared in good faith based upon reasonable assumptions (it being understood that such projections are subject to significant uncertainties and contingencies, many of which are beyond the 4 5 Company's control and that no assurance can be given that the projections will be realized). The Company agrees to supplement the information and projections from time to time until the Operative Documents become effective so that the representations and warranties contained in this paragraph remain correct. In accepting this Commitment Letter, you acknowledge that Citi/SSBI is entitled to rely on the accuracy of the information furnished to it by or on behalf of the Company and its affiliates and representatives without responsibility for independent verification thereof. SECTION 9. NO THIRD PARTY RELIANCE, ETC. The agreements of Citi/SSBI hereunder and of any Lender that issues a commitment to provide financing under the Facility are made solely for the benefit of the Company and may not be relied upon or enforced by any other person. Please note that those matters that are not covered or made clear herein are subject to mutual agreement of the parties. The Company may not assign or delegate any of its rights or obligations hereunder without Citi/SSBI's prior written consent. This Commitment Letter may not be amended or modified except in a written agreement signed by all parties hereto. This Commitment Letter is not intended to create a fiduciary relationship among the parties hereto. The Company should be aware that Citi/SSBI and/or one or more of its affiliates may be providing financing or other services to parties whose interests may conflict with the Company's interests, including with respect to the transactions contemplated hereby. Consistent with Citi/SSBI's longstanding policy to hold in confidence the affairs of its customers, neither Citi/SSBI nor any of its affiliates will furnish confidential information obtained from the Company to any of Citi/SSBI's other customers. Furthermore, neither Citi/SSBI nor any of its affiliates will make available to the Company confidential information that Citi/SSBI obtained or may obtain from any other customer. SECTION 10. GOVERNING LAW, ETC. This Commitment Letter shall be governed by, and construed in accordance with, the law of the State of New York. This Commitment Letter sets forth the entire agreement between the parties with respect to the matters addressed herein and supersedes all prior communications, written or oral, with respect hereto. This Commitment Letter may be executed in any number of counterparts, each of which, when so executed, shall be deemed to be an original and all of which, taken together, shall constitute one and the same Commitment Letter. Delivery of an executed counterpart of a signature page to this Commitment Letter by telecopier shall be as effective as delivery of an original executed counterpart of this Commitment Letter. Sections 3 through 8, 10 and 11 hereof shall survive the termination of Citibank's commitment hereunder. SECTION 11. WAIVER OF JURY TRIAL. Each party hereto irrevocably waives all right to trial by jury in any action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of or relating to this Commitment Letter or the transactions contemplated hereby or the actions of the parties hereto in the negotiation, performance or enforcement hereof. 5 6 Please indicate the Company's acceptance of the terms hereof by signing the enclosed copy of this Commitment Letter and the Fee Letter and returning them to Robert Danziger, Vice President, Salomon Smith Barney Inc., 390 Greenwich Street, New York, New York 10013 (fax: 212 723-8548 at or before 5:00 pm (New York City time) on September 27, 2001, the time at which Citibank's commitment hereunder (if not so accepted prior thereto) will terminate. If the Company elects to deliver this Commitment Letter by telecopier, please arrange for the executed original to follow by next-day courier. Very truly yours, SALOMON SMITH BARNEY INC. By /s/ Stephen R. Sellhausen ---------------------------- Name: Stephen R. Sellhausen Title: Managing Director CITIBANK, N.A. By /s/ Stephen R. Sellhausen ---------------------------- Name: Stephen R. Sellhausen Title: Managing Director ACCEPTED AND AGREED On September 26, 2001 TEMPLE-INLAND INC. By /s/ David W. Turpin ---------------------- Name: David W. Turpin Title: Treasurer 7 CONFIDENTIAL ANNEX 1 TEMPLE-INLAND INC. $900,000,000 364-DAY TERM LOAN FACILITY SUMMARY OF TERMS AND CONDITIONS BORROWER: Temple-Inland Inc. (the "Borrower") ADMINISTRATIVE AGENT: Citibank, N.A. ("Citibank") will serve as the sole administrative agent (the "Agent") for a syndicate of financial institutions (the "Lenders") acceptable to the Borrower and Citibank and arranged by Arranger (as defined below). ARRANGER: Salomon Smith Barney Inc. ACQUISITION: The Borrower will, through a wholly owned special purpose subsidiary ("Merger Sub") of Inland Container Corporation I, which is a wholly owned subsidiary of the Borrower, acquire (the "Acquisition") all the outstanding capital stock of a Delaware corporation identified as "Cubs" (the "Target") pursuant to an agreement and plan of merger (the "Merger Agreement") to be entered into by the Borrower, Merger Sub and the Target. The Merger Agreement will provide for: 1. (a) tender offers (collectively, the "Debt Tender") to be made by Inland Container Corporation I for all outstanding Senior Notes and Subordinated Notes of the Target (the "Target Debt") at an aggregate purchase price separately disclosed to Citibank and (b) a tender offer (the "Equity Tender") to be made by Merger Sub for all the issued and outstanding capital stock of the Target (the "Shares") at a purchase price of approximately $1.80 per Share in cash; and 2. a merger (the "Merger") of Merger Sub and the Target in which, subject to stockholders' dissenter rights, each Share not tendered in the Equity Tender would be converted into a right to receive $1.80 per Share in cash. In connection with the Acquisition, the Target will repay all amounts, subject to limited exceptions to be agreed upon, outstanding under, and terminate the commitments in respect of, the Target's existing bank debt and other existing debt totaling an amount separately disclosed to Citibank. AMOUNT: Up to $900,000,000. 8 ANNEX 1 FACILITY DESCRIPTION: $900,000,000 364-Day Term Loan Facility (the "Facility"). PURPOSE: The proceeds of the Facility will be used solely (a) to pay the cash consideration payable in the Acquisition, (b) to pay the cash consideration payable in the Debt Tender, (c) to repay certain of the Target's existing bank debt and other existing debt and (d) to pay related fees and expenses in connection with the Acquisition and the transactions contemplated hereby. CURRENCY: U.S. Dollars. AVAILABILITY: Loans under the Facility will be available in not more than seven drawings during the 120-day period beginning on and including the date on which the Acquisition is consummated (the "Closing Date"). Amounts repaid under the Facility may not be reborrowed. INTEREST RATES: Interest will be payable on the loans under the Facility at LIBOR (to be defined) per annum plus the Applicable Margin as set forth in the pricing and fee grid on Schedule I hereto. FACILITY FEE: As set forth in the pricing and fee grid on Schedule I hereto. A per annum fee calculated on a 360-day basis payable on each Lender's commitment irrespective of usage and payable quarterly in arrears. UTILIZATION FEE: As set forth in the pricing and fee grid on Schedule 1 hereto. A per annum fee calculated on a 360-day basis payable on each Lender's drawn commitments and payable quarterly in arrears. MATURITY AND REPAYMENT: The Facility will mature on the date 364 days after the Closing Date (the "Maturity Date") and full and final repayment of the Facility shall be due on the Maturity Date. SECURITY: (a) The Facility shall be secured by first-priority pledges of all the (i) capital stock of Merger Sub, (ii) capital stock of the Target acquired pursuant to the Equity Tender and (iii) debt securities acquired pursuant to the Debt Tender. (b) In addition, up to $250,000,000 of the Facility shall be secured by a first-priority lien on certain assets (the "Specified Assets", and together with the capital stock and debt securities referred to in paragraph (a) above, the "Collateral") of the Borrower or its subsidiaries pursuant to security arrangements satisfactory to the Agent, it being understood that such assets shall be satisfactory to the Agent and shall have an aggregate fair market value of no less than $300,000,000. The amount obligations secured by the Specified Assets shall be reduced on a dollar-for-dollar basis by the amount of any prepayments, whether voluntary or mandatory. -2- 9 ANNEX 1 CONDITIONS PRECEDENT TO CLOSING: Usual for facilities and transactions of this type, those specified below and others to be reasonably specified by Citibank, including but not limited to: 1. Execution and delivery of the Merger Agreement. Citibank shall be reasonably satisfied with all material terms and conditions of the Merger Agreement and all agreements entered into in connection therewith and with the terms of the Equity Tender and the Debt Tender and with (a) the corporate and capital structure of the Borrower and its subsidiaries after giving effect to the Acquisition and (b) all legal, tax and accounting matters relating to the Acquisition. 2. Consummation, or consummation simultaneously with the closing of the Facility, of the Acquisition in accordance with applicable laws and the Merger Agreement. All conditions to the purchase of the Target Debt in the Debt Tender shall have been satisfied and the Debt Tender shall have been consummated in accordance with its terms without giving effect to any waiver or amendment thereof not approved by the Lenders, and, in any event, the Borrower shall have received acceptances for payment of a sufficient amount of the Target Debt pursuant to the Debt Tender to permit Merger Sub to amend the Target Debt covenants without the vote of any other holders of the Target Debt. All conditions for the purchase of Shares in the Equity Tender shall have been satisfied and the Equity Tender shall have been consummated in accordance with its terms without giving effect to any waiver of amendment thereof not approved by the Lenders, and, in any event, the Borrower shall have received acceptances for purchase of no less than 2/3 of the Shares. 3. All requisite governmental authorities and third parties shall have approved or consented to the Acquisition and the other transactions contemplated hereby to the extent required. All applicable appeal periods shall have expired and there shall be no governmental or judicial action, actual or threatened, that has a reasonable likelihood of restraining, preventing or imposing burdensome conditions on the Acquisition or the other transactions contemplated hereby. -3- 10 ANNEX 1 4. Satisfactory completion of due diligence by Citibank. 5. Evidence reasonably satisfactory to Citibank that, after giving effect to the Acquisition and the other transactions contemplated hereby, the Borrower and its subsidiaries shall have no outstanding indebtedness or preferred stock other than (a) the loans under the Facility, (b) indebtedness of the Borrower and its subsidiaries (prior to giving effect to the Acquisition and the other transactions contemplated hereby) that is disclosed in public filings and (c) other indebtedness to be agreed upon. 6. The granting of, in favor of the Agent for the benefit of the Lenders, first-priority perfected security interests in the Collateral. 7. Other conditions precedent usual for facilities and transactions of this type including but not limited to delivery of satisfactory legal opinions; audited financial statements and other financial information, including pro forma financial statements and projections; accuracy of representations and warranties; absence of defaults, prepayment events or creation of liens under debt instruments as a result of the transactions contemplated hereby; evidence of authority; consents of all persons; compliance with applicable laws and regulations (including ERISA, margin regulations and environmental laws); and absence of any material adverse change in the business, condition (financial or otherwise), operations, performance, properties or prospects of the Borrower or the Borrower and its subsidiaries, taken as a whole, or any of its operating subsidiaries or the Target and its subsidiaries, taken as a whole, since December 31, 2000. VOLUNTARY PREPAYMENTS: Voluntary prepayments will be permitted in whole or in part, at the option of the Borrower, in minimum principal amounts to be agreed upon, without premium or penalty. MANDATORY PREPAYMENT AND REDUCTION: Loans under the Facility shall be prepaid with 100% of the net cash proceeds of (a) issuances of equity securities and debt obligations of the Borrower and its subsidiaries, including the Target and its subsidiaries, subject to limited exceptions to be agreed upon, and (b) all non-ordinary-course asset sales or other dispositions of property of the Borrower and its subsidiaries (including insurance and condemnation proceeds), subject to limited exceptions to be agreed upon. CONDITIONS TO BORROWING: Usual for facilities and transactions of this type, including but not limited to no defaults, no material adverse change and accuracy of representations and warranties in all material respects. REPRESENTATIONS AND Substantially similar to the Borrower's WARRANTIES: existing Credit Agreement dated May 14, 2001 (the "Existing Credit Agreement"), for the -4- 11 ANNEX 1 Borrower and its subsidiaries including but not limited to: 1. financial condition; 2. no material adverse change; 3. corporate existence and compliance with law; 4. corporate power, authorization and enforceable obligations; 5. no violation of law or material contracts, no requirement for creation or imposition of Liens; 6. no material litigation; 7. no default; 8. ownership of property free from Liens; 9. taxes; 10. compliance with ERISA; 11. environmental matters; 12. labor matters; and 13. accuracy of information provided. FINANCIAL COVENANTS: 1. Ratio of (a) Consolidated EBITDDA (as defined in the Existing Credit Agreement) to (b) Consolidated Interest Expense (as defined in the Existing Credit Agreement) for any period of four consecutive fiscal quarters ending on or after the Closing Date, shall not be less than 3.0:1.0. 2. Ratio of (a) Total Funded Indebtedness (as defined in the Existing Credit Agreement) to (b) Total Capitalization (as defined in the Existing Credit Agreement) for any period ending on or after the Closing Date shall not be more than 0.60:1.0. AFFIRMATIVE COVENANTS: Substantially similar to the Existing Credit Agreement (to be applicable to the Borrower and its subsidiaries) including but not limited to: 1. delivery of financial statements; 2. delivery of certificates and other information; 3. payment of obligations; 4. conduct of business and maintenance of existence; 5. maintenance of property and insurance; 6. keeping books and records and availability for inspection; 7. delivery of notices; 8. compliance with environmental laws; and 9. compliance with laws and material contractual obligations. -5- 12 ANNEX 1 NEGATIVE COVENANTS: Substantially similar to the Existing Credit Agreement (to be applicable to the Borrower and its subsidiaries) including but not limited to: 1. limitation on liens; 2. limitation on sale or disposition of assets; 3. limitation on consolidation and mergers; 4. transactions with affiliates; 5. use of proceeds; 6. restrictions on Borrower's subsidiaries; 7. sale/leaseback transactions; 8. accounting changes; and 9. incurrence of Subsidiary debt. EVENTS OF DEFAULT: Substantially similar to the Existing Credit Agreement (to be applicable to the Borrower and its subsidiaries) including but not limited to: 1. nonpayment of principal or interest; 2. incorrect representation or warranty in any material respect; 3. default under any material agreement; 4. violation of covenants; 5. cross default and cross acceleration; 6. bankruptcy etc; 7. ERISA; 8. material judgments; and 9. change in control. COST AND YIELD PROTECTION: Substantially similar to the Existing Credit Agreement. ASSIGNMENTS AND PARTICIPATIONS: Substantially similar to the Existing Credit Agreement. EXPENSES AND INDEMNIFICATION: Substantially similar to the Existing Credit Agreement. COUNSEL FOR THE ARRANGER AND THE Cravath, Swaine & Moore. AGENT: GOVERNING LAW AND FORUM: New York. -6- 13 ANNEX 1 SCHEDULE I TO SUMMARY OF TERMS AND CONDITIONS TEMPLE-INLAND, INC. $900,000,000 364-DAY TERM LOAN FACILITY PRICING AND FEE GRID
LEVEL 1 LEVEL 2 LEVEL 3 BASIS FOR PRICING OR LT Senior Unsecured LT Senior Unsecured LT Senior Unsecured FEE Debt Rated At Least Debt Rated Less Than Debt Rated Less Than A- By Standard & Level 1 But At Least Level 2 But At Least Poor's And A3 By BBB+ By Standard & BBB By Standard & Moody's. Poor's And Baa1 By Poor's And Baa2 By Moody's. Moody's. FACILITY FEE (1) 15.0 20.0 25.0 APPLICABLE MARGIN 47.5 67.5 100.0 UTILIZATION FEE 25.0 25.0 25.0 FULLY DRAWN COST(2) 87.5 112.5 150.0 LEVEL 4 LEVEL 5 BASIS FOR PRICING OR LT Senior Unsecured LT Senior Unsecured Debt FEE Debt Rated Less Than Rated BB+/Ba1 or lower. Level 3 But At Least BBB- By Standard & Poor's And Baa3 By Moody's. FACILITY FEE (1) 30.0 37.5 APPLICABLE MARGIN 132.5 175.0 UTILIZATION FEE 37.5 37.5 FULLY DRAWN COST(2) 200.0 250.0
(1) Paid quarterly in arrears on each bank's commitment irrespective of usage. (2) Facility Fee plus Applicable Margin plus Utilization Fee. Amounts in basis points per annum -7-
EX-99.(D)(1) 12 d90566ex99-d1.txt AGREEMENT AND PLAN OF MERGER DATED 9/27/01 1 ================================================================================ AGREEMENT AND PLAN OF MERGER by and among TEMPLE-INLAND INC., TEMPLE-INLAND ACQUISITION CORPORATION and GAYLORD CONTAINER CORPORATION Dated as of September 27, 2001 ================================================================================ 2 TABLE OF CONTENTS
Page ---- ARTICLE I THE OFFER............................................................3 Section 1.1 The Offer.........................................3 Section 1.2 The Notes Tender Offers...........................4 Section 1.3 Company Action....................................7 Section 1.4 Directors.........................................9 ARTICLE II THE MERGER..........................................................11 Section 2.1 The Merger.......................................11 Section 2.2 Closing..........................................11 Section 2.3 Effective Time...................................11 Section 2.4 Effects of the Merger............................11 Section 2.5 Certificate of Incorporation and By-Laws.........12 Section 2.6 Directors........................................12 Section 2.7 Officers.........................................12 ARTICLE III CONVERSION OF SECURITIES............................................12 Section 3.1 Effect on Capital Stock..........................12 Section 3.2 Exchange of Certificates.........................13 Section 3.3 Dissenting Shares................................15 Section 3.4 Company Options..................................15 Section 3.5 Company Warrants.................................16 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................17 Section 4.1 Organization, Standing and Corporate Power.......17 Section 4.2 Subsidiaries.....................................18 Section 4.3 Capital Structure................................18
-i- 3 Section 4.4 Authority; Noncontravention; Filings and Consents.........................................19 Section 4.5 Vote Required....................................21 Section 4.6 Company SEC Documents; Financial Statements; No Undisclosed Liabilities..........................21 Section 4.7 Information Supplied.............................22 Section 4.8 Books and Records................................23 Section 4.9 Inventory........................................23 Section 4.10 Absence of Certain Changes or Events.............23 Section 4.11 Litigation.......................................24 Section 4.12 Employee Benefit Plans; ERISA....................24 Section 4.13 Taxes............................................30 Section 4.14 State Takeover Statutes; Rights Agreement........34 Section 4.15 Brokers; Schedule of Fees and Expenses...........34 Section 4.16 Permits; Compliance with Laws....................35 Section 4.17 Environmental Matters............................35 Section 4.18 Contracts; Debt Instruments......................37 Section 4.19 Title to Properties..............................39 Section 4.20 Labor and Employment Difficulties................39 Section 4.21 Opinions of Financial Advisors...................40 Section 4.22 Interests of Officers and Directors..............40 Section 4.23 Intellectual Property............................40 Section 4.24 Insurance........................................43 Section 4.25 Customers and Suppliers..........................43 Section 4.26 Regulation as a Utility..........................43 Section 4.27 Qualifying Facility..............................44 ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY...............................................44 Section 5.1 Organization, Standing and Corporate Power.......44 Section 5.2 Authority; Noncontravention; Filings and Consents.........................................45 Section 5.3 Information Supplied.............................46 Section 5.4 Brokers..........................................47 Section 5.5 No Prior Activities; Assets of Merger Subsidiary.......................................47 Section 5.6 Sufficient Funds.................................47 Section 5.7 No Vote Required.................................47
-ii- 4 ARTICLE VI COVENANTS OF THE COMPANY............................................47 Section 6.1 Conduct of Business..............................47 Section 6.2 State Takeover Statutes..........................51 Section 6.3 Access to Information............................52 Section 6.4 No Solicitation by the Company...................52 Section 6.5 Litigation.......................................55 Section 6.6 Rights Agreement.................................55 Section 6.7 Certain Obligations of the Company...............55 ARTICLE VII COVENANTS OF PARENT AND MERGER SUBSIDIARY...........................55 Section 7.1 Indemnification..................................55 Section 7.2 Obligations of Merger Subsidiary.................56 Section 7.3 Employees........................................56 ARTICLE VIII ADDITIONAL AGREEMENTS...............................................59 Section 8.1 Stockholder Approval; Preparation of Company Proxy Statement..................................59 Section 8.2 HSR Act Filings; Reasonable Efforts; Notification.....................................60 Section 8.3 Public Announcements.............................63 Section 8.4 Confidentiality..................................63 ARTICLE IX CONDITIONS PRECEDENT................................................63 Section 9.1 Conditions to Each Party's Obligation to Effect the Merger.......................................63 ARTICLE X TERMINATION.........................................................64 Section 10.1 Termination......................................64 Section 10.2 Effect of Termination............................66
-iii- 5 ARTICLE XI GENERAL PROVISIONS..................................................66 Section 11.1 Fees and Expenses................................66 Section 11.2 Amendment and Modification.......................67 Section 11.3 Extension; Waiver................................67 Section 11.4 Nonsurvival of Representations and Warranties....67 Section 11.5 Notices..........................................68 Section 11.6 Interpretation...................................69 Section 11.7 Counterparts.....................................69 Section 11.8 Entire Agreement; No Third-Party Beneficiaries...69 Section 11.9 Governing Law....................................69 Section 11.10 Assignment.......................................69 Section 11.11 Enforcement......................................70 Section 11.12 Severability.....................................70 Annex I ..................................................................I-1
-iv- 6 LIST OF DEFINED TERMS 9-3/4% Senior Notes..........................................................1 9-3/4% Senior Notes Tender Offer.............................................1 9-3/8% Senior Notes..........................................................1 9-3/8% Senior Notes Tender Offer.............................................1 Acquisition Proposal........................................................54 Agreement....................................................................1 Antitrust Laws..............................................................61 Appointment Date............................................................47 Balance Sheet...............................................................23 Benefit Plans...............................................................25 Certificate of Merger.......................................................11 Certificates................................................................13 Closing.....................................................................11 Closing Date................................................................11 Code........................................................................25 Company......................................................................1 Company Board................................................................2 Company Class B Stock.......................................................18 Company Common Stock.........................................................1 Company Disclosure Schedule.................................................17 Company Intellectual Property...............................................40 Company Material Adverse Effect.............................................17 Company Preferred Stock.....................................................18 Company Proxy Statement.....................................................21 Company SEC Documents.......................................................21 Company Stockholder Vote....................................................19 Company Stockholders Meeting................................................59 Company Warrant.............................................................16 Confidentiality Agreement...................................................63 Consents....................................................................20 D&O Insurance...............................................................56 DGCL.........................................................................2 Effective Time..............................................................11 Environmental Claim.........................................................36 Environmental Law ..........................................................36 ERISA.......................................................................25 ERISA Affiliate.............................................................24 ERISA Plans.................................................................25 Exchange Act.................................................................4 Exchange Fund...............................................................13
-v- 7 Fully Diluted Shares.........................................................3 GAAP........................................................................22 Governmental Entity.........................................................20 Hazardous Substance.........................................................36 HSR Act.....................................................................21 Indemnified Parties.........................................................55 Indentures...................................................................5 Independent Directors.......................................................10 License Agreements..........................................................41 Liens.......................................................................18 Merger......................................................................11 Merger Consideration........................................................13 Merger Subsidiary............................................................1 Minimum Condition............................................................3 Minimum Note Condition.......................................................5 Noteholders..................................................................6 Notes........................................................................1 Notes Offer to Purchase......................................................5 Notes Tender Offers..........................................................1 Notes Tender Offers Documents................................................6 Offer........................................................................1 Offer Documents..............................................................4 Option Plans................................................................16 Order.......................................................................61 Parent.......................................................................1 Parent Material Adverse Effect..............................................44 Paying Agent................................................................13 PBGC........................................................................26 Permits.....................................................................35 Proposed Amendments..........................................................6 Recommendations..............................................................7 Rights......................................................................18 Rights Agreement............................................................18 Schedule 14D-9...............................................................8 SEC..........................................................................4 Securities Act..............................................................21 Senior Notes.................................................................1 Senior Subordinated Notes....................................................1 Senior Subordinated Notes Tender Offer.......................................1 Shares.......................................................................1 Software....................................................................40 Stock Option Agreement.......................................................2 Stockholders.................................................................2
-vi- 8 Stockholders Agreement.......................................................2 Subsidiary..................................................................17 Superior Proposal...........................................................55 Supplemental Indentures......................................................6 Surviving Corporation.......................................................11 Tax Returns.................................................................30 Termination Fee.............................................................66 Trade Secrets...............................................................40 Trademarks..................................................................40 Trustee.....................................................................16 WARN Act....................................................................40
-vii- 9 AGREEMENT AND PLAN OF MERGER THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of September 27, 2001, is by and among Temple-Inland Inc., a Delaware corporation ("Parent"), Temple-Inland Acquisition Corporation, a Delaware corporation and an indirect, wholly-owned subsidiary of Parent ("Merger Subsidiary"), and Gaylord Container Corporation, a Delaware corporation (the "Company"). WITNESSETH: WHEREAS, the Board of Directors of each of Parent, Merger Subsidiary and the Company have unanimously approved the acquisition of the Company by Parent and Merger Subsidiary; WHEREAS, in furtherance of such acquisition, it is proposed that Merger Subsidiary shall make a cash tender offer (the "Offer") to acquire all of the issued and outstanding shares of Class A Common Stock, par value $.0001 per share (the "Company Common Stock"), of the Company (the "Shares"), including the associated Rights (defined below in Section 4.3), in accordance with the terms provided in this Agreement; WHEREAS, in furtherance of such acquisition, it is proposed that simultaneously with the commencement of the Offer, Parent or its designee shall make (i) a tender offer (the "9-3/8% Senior Notes Tender Offer") for all of the $200 million aggregate principal amount at maturity of the Company's outstanding 9-3/8% Senior Notes due 2007 (the "9-3/8% Senior Notes"); (ii) a tender offer (the "9-3/4% Senior Notes Tender Offer") for all of the $225 million aggregate principal amount at maturity of the Company's outstanding 9-3/4% Senior Notes due 2007 (the "9-3/4% Senior Notes," and, together with the 9-3/8% Senior Notes, the "Senior Notes"), and (iii) a tender offer (the "Senior Subordinated Notes Tender Offer," and, together with the 9-3/8% Senior Notes Tender Offer and the 9-3/4% Senior Notes Tender Offer, the "Notes Tender Offers") for all of the $250 million aggregate principal amount at maturity of the Company's outstanding 9-7/8% Senior Subordinated Notes due 2008 (the "Senior Subordinated Notes," and, together with the Senior Notes, the "Notes"); 10 WHEREAS, consummation of the Offer is expressly conditioned upon consummation of each of the Notes Tender Offers; WHEREAS, in furtherance of such acquisition, the Board of each of Parent, Merger Subsidiary and the Company have approved this Agreement and the Merger (as defined in Section 2.1) following the Offer in accordance with the General Corporation Law of the State of Delaware (the "DGCL") and upon the terms and subject to the conditions set forth herein; WHEREAS, the Board of Directors of the Company (the "Company Board") has determined that the consideration to be paid for each Share in connection with the Offer and the Merger is fair to the holders of such Shares and has resolved to recommend that the holders of such Shares accept the Offer and approve this Agreement and each of the transactions contemplated by this Agreement upon the terms and subject to the conditions set forth herein; WHEREAS, simultaneously with the execution and delivery of this Agreement and as a condition and inducement to the willingness of Parent and Merger Subsidiary to enter into this Agreement, Parent and certain stockholders of the Company (collectively, the "Stockholders") are entering into an agreement, dated as of the date hereof (the "Stockholders Agreement") pursuant to which the Stockholders will agree to tender all of their Shares in the Offer and to take certain other actions in furtherance of the transactions contemplated by this Agreement upon the terms and subject to the conditions set forth in the Stockholders Agreement; and WHEREAS, simultaneously with the execution and delivery of this Agreement and as a condition and inducement to the willingness of Parent and Merger Subsidiary to enter into this Agreement, the Company, is entering into a Stock Option Agreement, dated as of the date hereof (the "Stock Option Agreement"), with Parent and Merger Subsidiary pursuant to which the Company is granting to Merger Subsidiary an option to purchase Shares upon the terms and subject to the conditions set forth in the Stock Option Agreement. NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained herein, and intending to be legally bound hereby, Parent, Merger Subsidiary and the Company hereby agree as follows: 2 11 ARTICLE I THE OFFER Section 1.1 The Offer. (a) Provided that (i) this Agreement shall not have been terminated in accordance with Section 10.1 and (ii) none of the events set forth in Annex I hereto shall have occurred or be existing and not have been waived, Merger Subsidiary shall, not later than five business days from the first public announcement of the execution of this Agreement, commence the Offer. Each Share (including the associated Right) accepted by Merger Subsidiary in accordance with the Offer shall be purchased for $1.80, net to the seller in cash, without interest. The Offer shall be subject to the conditions (i) that there shall be validly tendered in accordance with the terms of the Offer prior to the expiration date of the Offer and not withdrawn a number of Shares which, together with the Shares then owned by Parent and Merger Subsidiary, represents at least two-thirds of the total number of outstanding Shares, assuming the exercise of all outstanding warrants, options, rights and convertible securities (if any) (other than the Rights, Parent's option to acquire Company Common Stock pursuant to the Stock Option Agreement, to the extent not then exercised and options cancelled pursuant to Section 3.4(a) hereof) and the issuance of all Shares that the Company is obligated to issue pursuant thereto (such total number of outstanding Shares being hereinafter referred to as the "Fully Diluted Shares") (the "Minimum Stock Condition"), (ii) that Parent shall have simultaneously accepted for payment Notes in each of the Notes Tender Offers, and (iii) that the other conditions set forth in Annex I hereto shall have been satisfied or waived. Parent and Merger Subsidiary expressly reserve the right to waive the conditions to the Offer and to make any change in the terms or conditions of the Offer; provided that, without the written consent of the Company, no change may be made which changes the form or amount of consideration to be paid (other than by adding consideration), imposes conditions to the Offer in addition to those set forth in Annex I or changes or waives the Minimum Stock Condition or amends any other term of the Offer in a manner materially adverse to the holders of Shares. If on the initial scheduled expiration date of the Offer, which shall be no earlier than 20 business days after the date the Offer is commenced, all conditions to the Offer shall not have been satisfied or waived, Merger Subsidiary may, from time to time, in its sole discretion, extend the expiration date; provided that without the prior written consent of the Company, Merger Subsidiary may not extend the Offer beyond December 28, 2001 (except that Parent may extend the expiration date of the Offer after December 28, 2001 as required to comply with any rule, regulation or interpretation of the SEC). Subject to the terms and conditions of the Offer, Parent shall 3 12 cause Merger Subsidiary to accept for payment and pay for, as promptly as practicable after the expiration of the Offer, all Shares validly tendered and not withdrawn pursuant to the Offer. In addition, Merger Subsidiary may extend the Offer after the acceptance of Shares thereunder for a further period of time by means of a subsequent offering period under Rule 14d-11 promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), of not more than 20 business days to meet the objective (which is not a condition to the Offer) that there be validly tendered, in accordance with the terms of the Offer, prior to the expiration date of the Offer (as so extended) and not withdrawn a number of Shares, which together with Shares then owned by Parent and Merger Subsidiary, represents at least 90% of the Fully Diluted Shares. (b) As soon as practicable after the date of this Agreement, and not later than five business days from the first public announcement of the execution of this Agreement, Parent shall, and Parent shall cause Merger Subsidiary to, file with the Securities and Exchange Commission (the "SEC") a Tender Offer Statement on Schedule TO (together with any amendments or supplements thereto and any other filings pursuant to which the Offer will be made, the "Offer Documents"). Parent, Merger Subsidiary and the Company each agree promptly to correct any information provided by it for use in the Offer Documents if and to the extent that it shall have become false or misleading in any material respect. Parent and Merger Subsidiary agree to take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and to be disseminated to holders of Shares, 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. In addition, Parent and Merger Subsidiary agree to provide the Company and its counsel with any comments, whether written or oral, that Parent or Merger Subsidiary or their counsel may receive from time to time from the SEC or its staff with respect to the Offer Documents promptly after the receipt of such comments or other communications. Section 1.2 The Notes Tender Offers. (a) Provided that this Agreement shall not have been terminated in accordance with Section 10.1 and none of the events or circumstances set forth in Annex I hereto shall have occurred and be existing and not have been waived, Parent agrees that it or its designee will commence the Notes Tender Offers as promptly as reasonably practicable after the date hereof, but in no event later than five business days after the first public announcement of the execution hereof. The aggregate consideration payable to each holder of 4 13 Notes pursuant to the Notes Tender Offers shall be an amount in cash set forth in the Offer to Purchase and Consent Solicitation Statement made by Parent in connection with the Notes Tender Offers attached as Exhibit A hereto as amended from time to time (the "Notes Offer to Purchase"). In connection with the Notes Tender Offers, Parent intends to solicit consents to amend, eliminate or waive certain sections of the Indenture relating to the 9-3/8% Senior Notes, dated as of February 23, 1998 among the Company, the guarantors party thereto and State Street Bank and Trust Company, as trustee, the Indenture relating to the 9-3/4% Senior Notes, dated as of June 12, 1997 among the Company, the guarantors party thereto and Fleet National Bank, as trustee, and the Indenture relating to the Senior Subordinated Notes, dated as of February 23, 1998 among the Company, the guarantors party thereto and Chase Bank of Texas, National Association, as trustee (collectively, the "Indentures"), as set forth in the Notes Offer to Purchase. Parent's obligation to accept for payment and pay for the Notes and related consents tendered pursuant to the Notes Tender Offers shall be subject to the conditions that (i) the aggregate principal amount of each series of Notes validly tendered and not withdrawn prior to the expiration of the Notes Tender Offers, combined with the Notes already owned by Parent, Merger Subsidiary and their affiliates, constitutes at least 90% of the aggregate principal amount of each of the 9-3/8% Senior Notes, the 9-3/4% Senior Notes and the Senior Subordinated Notes outstanding at the expiration of the Notes Tender Offer with respect to each of such series of Notes (the "Minimum Note Condition"), (ii) Parent receives consents from at least a majority of the outstanding principal amount of each series of the Notes, and (iii) the other conditions set forth in Annex I hereto shall have been satisfied or waived (including, without limitation, the Minimum Stock Condition). Parent expressly reserves the right to waive any such condition (including without limitation the Minimum Note Condition), to increase the price payable for each Note and related consent tendered in the Notes Tender Offers, and to make any other changes in the terms and conditions of the Notes Tender Offers; provided, however, that Parent agrees that no change may be made without the consent of the Company which decreases the price payable for each Note and related consent tendered in the Notes Tender Offers, which increases the Minimum Note Condition, which eliminates the Minimum Stock Condition, which amends or eliminates any section of the Indentures, that, by the terms thereof, requires the approval of the holders of 100% of the outstanding principal amount of the Notes, which otherwise modifies or amends the conditions to the Notes Tender Offers or any other term of the Notes Tender Offers in a manner that is materially adverse to the tendering holders of the Notes, which imposes conditions to the Notes Tender Offers in addition to those set forth in Annex I hereto, or which extends the expiration date of the Notes Tender Offers beyond December 28, 2001 (except that Parent may extend the expiration date of the 5 14 Notes Tender Offers after December 28, 2001 as required to comply with any rule, regulation or interpretation of the SEC or to coincide with the termination date of the Offer); provided, however, that Parent expressly reserves the right, in its sole discretion, to reduce the minimum percentage of any series of Notes to be purchased in the Notes Tender Offers. The Notes Tender Offers shall provide that any tender of Notes under the Notes Tender Offers shall also constitute a consent to the amendments to the Indentures. Subject to the terms and conditions of the Notes Tender Offers (including, without limitation, the Minimum Note Condition), Parent agrees to accept for payment and to pay for, as promptly as practicable after expiration of the Notes Tender Offers, all Notes and related consents validly tendered and not withdrawn. (b) Parent agrees to disseminate to the record holders of the Notes, and to the extent disclosed to Parent by the Company, the beneficial owners of the Notes (collectively, the "Noteholders"), the Notes Tender Offers pursuant to the terms of the Notes Offer to Purchase, together with related letters of transmittal and similar ancillary agreements (such documents, together with all supplements and amendments thereto, being referred to herein collectively as the "Notes Tender Offers Documents"), which shall have been provided to the Company and its counsel a reasonable time prior to dissemination to holders of the Notes and to which the Company shall not have reasonably objected. Parent and the Company agree to correct promptly any information provided by any of them for use in the Notes Tender Offers Documents which shall have become false or misleading, and Parent further agrees to take all steps necessary to cause the Notes Tender Offers Documents as so corrected to be disseminated to holders of Notes, in each case as and to the extent required by applicable Federal securities laws. (c) At such time as Parent receives Consents from at least a majority of each series of the outstanding principal amount of the Notes, the Company agrees to execute, and to cause the guarantors party to the Indentures to execute, and will use all reasonable efforts to cause the trustees under the Indentures to execute, supplemental indentures (the "Supplemental Indentures") in order to give effect to the amendments of the Indentures contemplated in the Notes Tender Offers Documents; provided, however, that notwithstanding the fact that the Supplemental Indentures will become effective upon such execution, the proposed amendments set forth therein (the "Proposed Amendments") will not become operative unless and until the Minimum Note Condition is satisfied or waived and all other conditions to the Notes Tender Offers set forth on Annex I have been satisfied or waived by Parent and Parent accepts all Notes (and related Consents) validly tendered for purchase and 6 15 payment pursuant to the Notes Tender Offers. In such event, the parties hereto agree that the Proposed Amendments will be deemed operative as of immediately prior to such acceptance for payment, and Parent will thereafter be obligated to make all payments for the Notes (and related Consents) so tendered. (d) The Company agrees to promptly furnish Parent with mailing labels containing the names and addresses of all record holders of Notes and security position listings of the Notes held in depositories, each as of a recent date, together with all other available listings and computer files containing names, addresses and security position listings of Noteholders. The Company agrees to furnish Parent with such additional information, including, without limitation, updated listings and computer files of Noteholders, mailing labels and security position listings, and such other assistance as Parent or its agents may reasonably request. Subject to the requirements of applicable law, and except for such steps as are necessary to disseminate the Notes Tender Offers Documents and any other documents necessary to consummate the transactions contemplated thereby, Parent shall hold in confidence the information contained in such labels, listings and files, shall use such information only in connection with the Notes Tender Offers and, if this Agreement shall be terminated in accordance with Section 10.1, shall deliver to or cause to be delivered to the Company all copies of such information, labels, listings and files then in its possession or in the possession of its agents or representatives. Section 1.3 Company Action. (a) The Company hereby approves of and consents to the Offer and the Notes Tender Offers and represents that the Company Board has unanimously (i) determined that this Agreement and the transactions contemplated hereby, including the Offer and the Merger, are advisable and are fair to and in the best interest of the Company's stockholders, (ii) approved and adopted this Agreement, including the Offer, the Merger, the Stock Option Agreement and the Stockholders Agreement and the transactions contemplated hereby and thereby, which approval constitutes approval under Section 203 of the DGCL such that the Offer, the Merger, this Agreement, the Stock Option Agreement and the Stockholders Agreement and the other transactions contemplated hereby and thereby are not and shall not be subject to any restriction of Section 203 of the DGCL, and (iii) resolved to recommend that the stockholders of the Company accept the Offer, tender their Shares to Merger Subsidiary thereunder and approve and adopt this Agreement and the Merger (the recommendations referred to in this clause (iii) are collectively referred to in this Agreement as the "Recommendations"). The Company further represents that Deutsche Banc Alex. Brown and Rothschild Inc. have rendered to the Company Board their opinions that the consideration to be 7 16 received by the Company's stockholders pursuant to this Agreement is fair to such stockholders from a financial point of view. The Company has been advised that all of its directors and executive officers presently intend to tender their Shares pursuant to the Offer. (b) As soon as practicable on the day that the Offer is commenced, the Company will file with the SEC and disseminate to holders of Shares a Solicitation/Recommendation Statement on Schedule 14D-9 (together with all amendments and supplements thereto, the "Schedule 14D-9") which shall contain, except as provided in Section 6.4, the Recommendations. At the time the Offer Documents are first mailed to the stockholders of the Company, the Company shall mail or cause to be mailed to the stockholders of the Company such Schedule 14D-9 together with such Offer Documents. The Company further agrees to take all steps necessary to cause the Schedule 14D-9 to be disseminated to holders of the Shares, as and to the extent required by applicable Federal securities laws. Each of the Company, on the one hand, and Parent and Merger Subsidiary, on the other hand, 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 the Company further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and to be disseminated to holders of the Shares, in each case as and to the extent required by applicable Federal securities laws. Parent and its counsel shall be given the opportunity to review the Schedule 14D-9 before it is filed with the SEC. In addition, the Company agrees to provide Parent, Merger Subsidiary and their counsel with any comments, whether written or oral, that the Company or its counsel may receive from time to time from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt of such comments or other communications. (c) In connection with the Offer, the Company shall promptly furnish Merger Subsidiary with mailing labels containing the names and addresses of all record holders of Shares and with security position listings of Shares held in stock depositories, each as of a recent date, together with all other available listings and computer files containing names, addresses and security position listings of record holders and non-objecting beneficial owners of Shares. The Company shall furnish Merger Subsidiary with such additional information, including, without limitation, updated listings and computer files of stockholders, mailing labels and security position listings, and such other assistance as Parent, Merger Subsidiary or their agents may reasonably require in communicating the Offer to the record and beneficial holders of Shares. Subject to the requirements of applicable law, and except for 8 17 such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Offer or the Merger, Parent and Merger Subsidiary shall hold in confidence the information contained in such labels, listings and files, shall use such information solely in connection with the Offer and the Merger, and, if this Agreement is terminated, will upon the request of the Company deliver or cause to be delivered to the Company all copies of such information, labels, listings and files then in their possession or in the possession of their agents or representatives. Section 1.4 Directors. (a) Promptly upon the purchase of and payment for Shares by Merger Subsidiary or any of its affiliates pursuant to the Offer as a result of which Parent or Merger Subsidiary beneficially own at least a majority of the outstanding Shares, Parent shall be entitled to designate the number of directors, rounded up to the next whole number, on the Company Board that equals the product of (i) the total number of directors on the Company Board (giving effect to the election of any additional directors pursuant to this Section 1.4) and (ii) the percentage that the number of Shares owned by Parent or Merger Subsidiary (including Shares accepted for payment) bears to the total number of Shares outstanding. In furtherance thereof, the Company shall, upon request of the Parent, use its best efforts promptly either to increase the size of its Board or to secure the resignations of such number of its incumbent directors, or both, as is necessary to enable such designees of Parent to be so elected or appointed to the Company's Board, and the Company shall take all actions available to the Company to cause such designees of Parent to be so elected and, subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, shall cause Parent's designees to be so elected. At such time, the Company shall, if requested by Parent, also take all action necessary to cause persons designated by Parent to constitute the same percentage (rounded up to the next whole number) as is on (i) each committee of the Company Board, (ii) each board of directors (or similar body) of each Subsidiary of the Company and (iii) each committee (or similar body) of each such board. (b) The Company shall promptly take all actions required pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order to fulfill its obligations under Section 1.4(a), including mailing to stockholders the information required by such Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder as is necessary to enable Parent's designees to be elected or appointed to the Company Board immediately after the purchase of and payment for any Shares by Parent or any of its Subsidiaries (as defined in Section 4.1) as a result of which Parent and its Subsidiaries beneficially own at least a majority of then 9 18 outstanding Shares. Parent or Merger Subsidiary will supply the Company all information with respect to either of them and their nominees, officers, directors and affiliates required to be disclosed by such Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. The provisions of this Section 1.4 are in addition to and shall not limit any rights which Merger Subsidiary, Parent or any of their affiliates may have as a holder or beneficial owner of Shares as a matter of law with respect to the election of directors or otherwise. (c) In the event that Parent's designees are elected or appointed to the Company Board, until the Effective Time, the Company Board shall have at least two directors who are directors on the date hereof and are not employees of the Company ("Independent Directors"), provided that, in such event, if the number of Independent Directors shall be reduced below two for any reason whatsoever, any remaining Independent Directors (or Independent Director, if there be only one remaining) shall be entitled to designate persons to fill such vacancies who shall be deemed to be Independent Directors for purposes of this Agreement or, if no Independent Director then remains, the other directors shall designate two persons to fill such vacancies who shall not be stockholders, affiliates, associates or employees of Parent, Merger Subsidiary or the Company, and such persons shall be deemed to be Independent Directors for purposes of this Agreement. Notwithstanding anything in this Agreement to the contrary, in the event that Parent's designees constitute a majority of the directors on the Company Board, the affirmative vote of a majority of the Independent Directors shall be required after the acceptance for payment of Shares pursuant to the Offer and prior to the Effective Time, to (a) amend or terminate this Agreement by the Company, (b) cause the Company to extend or waive the time for the performance of any of the obligations or other acts of Parent or Merger Subsidiary under this Agreement, (c) waive any of the Company's rights hereunder, or (d) take any other action under or in connection with this Agreement if such action materially and adversely affects holders of Shares other than Parent or Merger Subsidiary; provided, that if, notwithstanding reasonable efforts set forth above to ensure that at least two directors are Independent Directors, there shall be no such directors, such actions (except for any amendment, modification or waiver of Sections 2.3 or 8.1 hereof) may be effected by unanimous vote of the entire Company Board. 10 19 ARTICLE II THE MERGER Section 2.1 The Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the relevant provisions of the DGCL, Merger Subsidiary shall be merged with and into the Company (the "Merger") at the Effective Time (hereinafter defined). Following the Merger, the separate corporate existence of Merger Subsidiary shall cease and the Company shall continue as the surviving corporation (the "Surviving Corporation") and shall succeed to and assume all the rights and obligations of Merger Subsidiary in accordance with the DGCL. Section 2.2 Closing. The closing of the Merger (the "Closing") will take place at 10:00 a.m. on a date to be specified by the parties, which shall be no later than the second business day after satisfaction or waiver of the conditions set forth in Section 9.1, at the offices of Skadden, Arps, Slate, Meagher & Flom LLP, 1440 New York Avenue, N.W., Washington D.C. 20005, unless another date or place is agreed to in writing by the parties hereto (such date upon which the Closing occurs, the "Closing Date"). Section 2.3 Effective Time. As soon as practicable following the satisfaction or waiver of the conditions set forth in Article IX (and subject to no other condition set forth herein or otherwise), the parties shall use their best efforts to consummate the Merger, including without limitation (if required) voting all Shares held by such parties in favor of the Merger and filing a certificate of merger or other appropriate documents (the "Certificate of Merger") executed in accordance with the relevant provisions of the DGCL and shall make all other filings or recordings required under the DGCL. The Merger shall become effective at such time as the Certificate of Merger is duly filed with the Delaware Secretary of State, or at such other time as Parent and the Company shall agree and specify in the Certificate of Merger (the time the Merger becomes effective, the "Effective Time"). Section 2.4 Effects of the Merger. The Merger shall have the effects set forth in Section 259 of the DGCL. 11 20 Section 2.5 Certificate of Incorporation and By-Laws. (a) The Certificate of Incorporation of Merger Subsidiary, as in effect immediately prior to the Effective Time, shall be the Certificate of Incorporation of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable law. (b) The By-Laws of Merger Subsidiary as in effect at the Effective Time shall be the By-Laws of the Surviving Corporation, until changed or amended as provided therein or by applicable law. Section 2.6 Directors. The directors of Merger Subsidiary at the Effective Time shall be the directors of the Surviving Corporation, until the earlier of their death, resignation or removal or until their successors are duly elected and qualified. Section 2.7 Officers. The officers of Merger Subsidiary at the Effective Time shall be the officers of the Surviving Corporation, until the earlier of their death, resignation or removal or until their successors are duly elected and qualified. ARTICLE III CONVERSION OF SECURITIES Section 3.1 Effect on Capital Stock. As of the Effective Time, by virtue of the Merger and without any action on the part of the holder of any shares of Company Common Stock or any shares of capital stock of Merger Subsidiary: (a) Capital Stock of Merger Subsidiary. Each issued and outstanding share of the capital stock of Merger Subsidiary shall be converted into and become one fully paid and nonassessable share of common stock, par value $.01 per share, of the Surviving Corporation. (b) Cancellation of Treasury Stock and Parent-Owned Stock. Each share of Company Common Stock that is owned by the Company or by any Subsidiary of the Company and each share of Company Common Stock that is owned by Parent, Merger Subsidiary or any other Subsidiary of Parent shall automatically be canceled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor. 12 21 (c) Conversion of Company Common Stock. Each issued and outstanding share of Company Common Stock (other than shares to be canceled in accordance with Section 3.1(b) or shares as to which appraisal rights have been exercised in accordance with Section 3.3) shall be converted into the right to receive $1.80, net to the seller in cash (the "Merger Consideration"), without interest. As of the Effective Time, all such shares of Company Common Stock shall no longer be outstanding and shall automatically be canceled and retired and shall cease to exist, and each holder of a certificate representing any such shares of Company Common Stock shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration. Section 3.2 Exchange of Certificates. (a) Paying Agent. Parent shall designate a bank or trust company to act as agent for the holders of the Shares in connection with the Merger to receive in trust the Merger Consideration to which holders of the Shares shall become entitled pursuant to Section 3.1(c) (the "Paying Agent"). At the Effective Time, Parent shall deposit with the Paying Agent, for the benefit of the holders of shares of Company Common Stock, for payment in accordance with this Article III, the aggregate Merger Consideration to be paid pursuant to Section 3.1(c) (collectively, the "Exchange Fund") for the outstanding shares of Company Common Stock. For purposes of determining the amount of Merger Consideration to be deposited by Parent in the Exchange Fund, Parent shall assume that no holder of Shares will perfect such holder's right to appraisal of such holder's Shares. (b) Exchange Procedure. As soon as practicable after the Effective Time, the Paying Agent shall mail to each holder of record of a certificate or certificates which immediately prior to the Effective Time represented outstanding shares of Company Common Stock (the "Certificates") whose shares were converted into the right to receive the Merger Consideration pursuant to Section 3.1, (i) a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent and shall be in a form and have such other provisions as Parent may reasonably specify) and (ii) instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration. Upon surrender of a Certificate for cancellation to the Paying Agent, together with such letter of transmittal, duly executed, and such other documents as may reasonably be required by the Paying Agent, the holder of such Certificate shall be entitled to receive in exchange therefor 13 22 the Merger Consideration into which the shares of Company Common Stock shall have been converted pursuant to Section 3.1, and the Certificate so surrendered shall be canceled. In the event of a transfer of ownership of Company Common Stock which is not registered in the transfer records of the Company, payment may be made to a person other than the person in whose name the Certificate so surrendered is registered, if such Certificate shall be properly endorsed or otherwise be in proper form for transfer and the person requesting such payment shall pay any transfer or other taxes required by reason of the payment to a person other than the registered holder of such Certificate or establish to the satisfaction of the Surviving Corporation that such tax has been paid or is not applicable. At any time after the Effective Time, each Certificate shall be deemed to represent only the right to receive, without interest, upon surrender the Merger Consideration into which the shares of Company Common Stock shall have been converted pursuant to Section 3.1. (c) No Further Ownership Rights in Company Common Stock. All Merger Consideration paid upon the surrender of Certificates in accordance with the terms of this Article III shall be deemed to have been paid in full satisfaction of all rights pertaining to the shares of Company Common Stock represented by such Certificates, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the shares of Company Common Stock which were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates are presented to the Surviving Corporation for any reason, they shall be canceled and exchanged as provided in this Article III. (d) Termination of Exchange Fund; No Liability. Any portion of the Exchange Fund which remains undistributed to the holders of the Certificates for one year after the Effective Time shall be delivered to Parent, upon demand, and any holders of the Certificates who have not theretofore complied with this Article III shall thereafter look only to Parent for payment of their claim for Merger Consideration. None of Parent, Merger Subsidiary, the Company or the Paying Agent shall be liable to any person in respect of any Merger Consideration from the Exchange Fund delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. If any Certificate shall not have been surrendered prior to one year after the Effective Time (or immediately prior to such date on which any amounts payable pursuant to this Article III would otherwise escheat to or become the property of any Governmental Entity (as defined in Section 4.4(c)), any such amounts shall, to the extent permitted by applicable escheat law, become the property of the Surviving Corporation, free and clear of all claims or interest of any person previously entitled thereto. Any portion of the Merger Consideration deposited in the 14 23 Exchange Fund pursuant to this Section 3.2 in consideration of Shares for which appraisal rights, if any, have been perfected shall be returned to Parent, upon demand. (e) Investment of Exchange Fund. The Paying Agent shall invest any cash in the Exchange Fund, as directed by Parent; provided that such investments shall be in obligations of or guaranteed by the United States of America or of any agency thereof and backed by the full faith and credit of the United States of America or in commercial paper obligations rated A-1 or P-1 or better by Standard & Poor's Ratings Group or Moody's Investor Service, Inc., respectively. Any interest and other income resulting from such investments shall be paid to Parent. (f) Lost Certificates. If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by Parent, the posting by such person of a bond in such reasonable amount as Parent may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent shall issue in exchange for such lost, stolen or destroyed Certificate the applicable Merger Consideration with respect thereto. Section 3.3 Dissenting Shares. Notwithstanding Section 3.1(c), Shares outstanding immediately prior to the Effective Time and held by a holder who has demanded appraisal for such Shares in accordance with the DGCL shall not be converted into a right to receive the Merger Consideration, unless such holder fails to perfect or withdraws or otherwise loses his right to appraisal. If after the Effective Time such holder fails to perfect or withdraws or loses his right to appraisal, such Shares shall be treated as if they had been converted as of the Effective Time into a right to receive the Merger Consideration. The Company shall give Parent prompt notice of any demands received by the Company for appraisal of Shares, and Parent shall have the right to participate in all negotiations and proceedings with respect to such demands. The Company shall not, except with the prior written consent of Parent, make any payment with respect to, or settle or offer to settle, any such demands. Section 3.4 Company Options. (a) Stock Options. Prior to consummation of the Offer, the Company shall take all necessary action to: (i) terminate, effective not later than the Effective Time, the Gaylord Container Corporation Employee Stock Purchase Plan 15 24 and all of the stock option plans listed in Section 4.12(a) of the Company Disclosure Schedule (as defined in Section 4.2) (the "Option Plans"), (ii) cancel, effective not later than the Effective Time, each option to purchase shares of Company Common Stock granted under the Gaylord Container Corporation 1997 Long-Term Equity Incentive Plan and the Gaylord Container Corporation Outside Director Stock Option Plan, that is outstanding and unexercised as of such time, (iii) cancel, effective not later than the Effective Time, each option to purchase shares of Company Common Stock granted under all Option Plans held by any of the individuals listed in Section 3.4(a) of the Company Disclosure Schedule that is outstanding and unexercised as of such time, (iv) use its commercially reasonable efforts to obtain consents of the individual holders to cancel, effective not later than the Effective Time, each outstanding option to purchase shares of Company Common Stock granted under any Option Plans that is outstanding and unexercised as of such time and that is not otherwise canceled pursuant to the foregoing clauses (ii) and (iii) (it being under stood that the failure of the Company to obtain the consent of any such holder, after a good faith effort, shall not be deemed a breach of this clause (iv)). (b) Compliance with Section 16. Prior to the Effective Time, the Company shall take all action reasonably necessary to approve the disposition of the Company Options and other awards in accordance with this Section 3.4 so as to exempt such dispositions under Rule 16b-3 of the Exchange Act. By adopting and approving this Agreement, the Board of Directors of the Company shall be deemed to have approved and authorized each and every arrangement with respect to the Option Plans and other plans, programs, agreements or arrangements as may be deemed necessary or appropriate to give effect to the provisions of this Section 3.4. Section 3.5 Company Warrants. As of the Effective Time, the unexercised Company Redeemable Exchangeable Warrants (each a "Company Warrant") shall be exercisable (subject to the terms and conditions of the Warrant Agreement between the Company and The Bank of New York, as successor trustee to Harris Trust and Savings Bank (the "Trustee"), dated November 2, 1992) only for such Merger Consideration as is paid and issued to the Trustee, designated pursuant to the Trust Agreement between the Company and Harris Trust and Savings Bank, in exchange for the shares of Company Common Stock held by such Trustee immediately theretofore obtainable upon exercise of such Company Warrants. 16 25 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY Except as set forth in the disclosure schedule attached hereto (the "Company Disclosure Schedule"), which disclosure schedule shall make a specific reference to the particular Section of this Agreement to which exception is being taken, the Company hereby represents and warrants to Parent and Merger Subsidiary as follows: Section 4.1 Organization, Standing and Corporate Power. Each of the Company and each of its Subsidiaries (as defined below) is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is organized and has the requisite corporate or other power and authority, as the case may be, to carry on its business as now being conducted. Each of the Company and each of its Subsidiaries is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed and in good standing (individually or in the aggregate) would not have, or be reasonably likely to have, a material adverse effect on the condition (financial or otherwise), business, assets, liabilities, prospects or results of operations of the Company and its Subsidiaries taken as a whole, excluding effects from general economic conditions, general securities market conditions, conditions affecting the Company's industry generally, or the announcement of this Agreement or the transactions contemplated hereby (a "Company Material Adverse Effect"). The Company has delivered or made available to Parent complete and correct copies of its Certificate of Incorporation and By-Laws and the Certificates of Incorporation and By-Laws or other comparable charter or organizational documents of its Subsidiaries, in each case as amended to the date of this Agreement. For purposes of this Agreement, a "Subsidiary" of any person means another person, an amount of the voting securities, other voting ownership or voting partnership interests of which is sufficient to elect at least a majority of its Board of Directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first person; and a "person" means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity. 17 26 Section 4.2 Subsidiaries. Section 4.2 of the Company Disclosure Schedule contains a true and accurate list of each Subsidiary of the Company and its respective jurisdiction of incorporation or organization, the outstanding capital of each such Subsidiary and the jurisdictions in which each such Subsidiary is qualified to do business. All the outstanding shares of capital stock of, or other equity interests in, each Subsidiary have been duly authorized and validly issued and are fully paid and nonassessable and are owned by the Company, by another Subsidiary of the Company or by the Company and another such Subsidiary, free and clear of all pledges, claims, liens, charges, encumbrances and security interests of any kind or nature whatsoever (collectively, "Liens") and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock). Except for the capital stock of, or other equity interests in, its Subsidiaries, the Company does not own, directly or indirectly, any capital stock or other ownership interest in any person. Section 4.3 Capital Structure. The authorized capital stock of the Company consists of 25,000,000 shares of Preferred Stock, par value $0.01 per share (the "Company Preferred Stock"), 125,000,000 shares of Company Common Stock and 15,000,000 shares of Class B Common Stock, par value $.0001 per share (the "Company Class B Stock"). As of September 26, 2001, (i) no shares of Company Preferred Stock were issued and outstanding, (ii) 55,971,493 shares of Company Common Stock were issued and outstanding, including associated Preferred Share Purchase Rights (the "Rights") issued pursuant to the Rights Agreement, dated as of June 12, 1995 (the "Rights Agreement"), between the Company and Harris Trust and Savings Bank, as Rights Agent, (iii) no shares of Company Class B Stock were issued and outstanding, (iv) 1,199,301 shares of Company Common Stock were held by the Company in its treasury or by any of the Company's Subsidiaries, (v) 2,260,836 shares of Company Common Stock were reserved for issuance pursuant to the Option Plans (of which 1,854,403 were issuable upon the exercise of outstanding Company Options), (vi) 827,135 shares of Company Common Stock were issuable upon the exercise of outstanding Company Warrants, which are included in the outstanding shares of Company Common Stock set forth in clause (ii) above, and (vii) 2,130,500 shares were restricted shares of Common Stock, which are included in the outstanding shares of Company Common Stock set forth in clause (ii) above. Except as set forth above and except for the Company Preferred Stock issuable upon exercise of the Rights and the Company Common Stock issuable upon exercise of the Stock Option Agreement, as of the date of this Agreement, no shares of capital stock or other voting securities of the Company are issued, reserved for issuance or outstanding. All outstanding shares of capital stock of the Company are, and all 18 27 shares which may be issued pursuant to the Option Plans, the Stock Option Agreement and the Company Warrants will be, when issued in accordance with the respective terms thereof, duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights. Except as set forth above, there are no outstanding bonds, debentures, notes or other indebtedness or securities of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company may vote. Except as set forth above, there are no outstanding securities, options, warrants, calls, rights, commitments, agreements or undertakings of any kind to which the Company or any of its Subsidiaries is a party or by which any of them is bound obligating the Company or any of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other voting securities of the Company or of any of its Subsidiaries or obligating the Company or any of its Subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement, or undertaking. There are no outstanding rights, commitments, agreements, or undertakings of any kind obligating the Company or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital stock or other voting securities of the Company or any of its Subsidiaries or any securities of the type described in the two immediately preceding sentences. There are no voting trusts or other agreements or understandings to which the Company or any of its Subsidiaries is a party with respect to the voting of the capital stock of the Company or any of its Subsidiaries. Except as provided by Section 3.4(a), following the Effective Time, no holder of Company Options or Company Warrants will have any right to receive shares of common stock of the Surviving Corporation upon exercise of Company Options or Company Warrants. The Company has delivered or made available to Parent complete and correct copies of the Option Plans, all forms of Company Options and all warrant agreements relating to the Company Warrants. Section 4.3 of the Company Disclosure Schedule sets forth a complete and accurate list of all Company Options and Company Warrants outstanding as of the date of this Agreement, and the respective exercise price of each outstanding Company Option and Company Warrant. Section 4.4 Authority; Noncontravention; Filings and Consents. (a) The Company has the requisite corporate power and authority to execute and deliver this Agreement and, subject to the requisite approval of this Agreement by the holders of the outstanding shares of Company Common Stock (the "Company Stockholder Vote") with respect to the Merger, to consummate the transactions contemplated by this Agreement. The execution and delivery of this 19 28 Agreement by the Company and the consummation by the Company of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action on the part of the Company, subject, in the case of the Merger if required under the DGCL, to approval of this Agreement by the Company Stock holder Vote. This Agreement has been duly executed and delivered by the Company and, assuming that this Agreement constitutes a legal, valid and binding obligation of Parent and Merger Subsidiary, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and similar laws, now or hereafter in effect, relating to or affecting creditors' rights and remedies and to general principles of equity. (b) The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated by this Agreement and compliance with the provisions of this Agreement will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or result in the creation of any Lien upon any of the properties or assets of the Company or any of its Subsidiaries under, (i) the Certificate of Incorporation or By-Laws of the Company or the comparable charter or organizational documents of any of its Subsidiaries in each case as amended to the date of this Agreement, (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license applicable to the Company or any of its Subsidiaries or their respective properties or assets or (iii) subject to the governmental filings and other matters referred to in paragraph (c) below, any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company or any of its Subsidiaries or their respective properties or assets, other than, in the case of clauses (ii) and (iii), any such conflicts, violations, defaults, rights, losses or Liens that individually or in the aggregate would not (x) have a Company Material Adverse Effect, (y) impair the Company's ability to perform its obligations under this Agreement or (z) prevent or materially delay the consummation of the transactions contemplated by this Agreement. (c) No consent, approval, order or authorization of, or registration, declaration or filing with or exemption by (collectively, "Consents") any Federal, state or local government or any court, administrative or regulatory agency or commission or other governmental authority or agency, domestic or foreign (a "Governmental Entity"), is required by or with respect to the Company or any of its 20 29 Subsidiaries in connection with the execution and delivery of this Agreement by the Company or the consummation by the Company of the transactions contemplated by this Agreement, except for (i) the filing of a premerger notification and report form by the Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and any applicable filings under similar foreign antitrust or competition laws and regulations, (ii) the filing with the SEC of (A) the Schedule 14D-9, (B) if required, a proxy statement relating to the Company Stockholders Meeting (defined below in Section 8.1(b)) (as amended or supplemented from time to time, the "Company Proxy Statement"), and (C) such reports under the Exchange Act and the Securities Act (as defined in Section 4.6), as may be required in connection with this Agreement, the Stock Option Agreement and the Stockholders Agreement and the transactions contemplated hereby and thereby, (iii) such filings as may be required under state securities or "blue sky" laws, (iv) the filing of the Certificate of Merger with the Delaware Secretary of State and appropriate documents with the relevant authorities of other states in which the Company is qualified to do business, and (v) such other consents, approvals, orders, authorizations, registrations, declarations and filings the failure of which to be made or obtained individually or in the aggregate would not (x) have a Company Material Adverse Effect, (y) impair the Company's ability to perform its obligations under this Agreement or (z) prevent or materially delay the consummation of the transactions contemplated by this Agreement. Section 4.5 Vote Required. The affirmative vote of the holders of 66-2/3 percent of the outstanding Shares is the only vote of the holders of any class or series of the Company's capital stock necessary to approve the Merger. No vote of any class or series of the Company's capital stock is necessary to approve any of the transactions contemplated by this Agreement other than the Merger. Section 4.6 Company SEC Documents; Financial Statements; No Undisclosed Liabilities. The Company has filed and has heretofore made available to Parent, true and complete copies of, all required reports, schedules, forms, statements and other documents with the SEC since September 30, 1999 (the "Company SEC Documents"). As of their respective dates, (i) the Company SEC Documents complied, and all similar documents filed prior to the Closing Date will comply, in all material respects with the requirements of the Securities Act of 1933, as amended (the "Securities Act"), or the Exchange Act, as the case may be, and the rules and regulations of the SEC promulgated thereunder applicable to such Company SEC Documents, and (ii) none of the Company SEC Documents when filed contained, nor will any similar document filed after the date of this Agreement contain, any untrue 21 30 statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. None of the Company's Subsidiaries is required to file any forms, reports or other documents with the SEC. The financial statements of the Company included in the Company SEC Documents (including any similar documents filed after the date of this Agreement) as of their respective dates comply as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") (except, in the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto) and fairly present the consolidated financial position of the Company and its consolidated subsidiaries as of the dates thereof and the consolidated results of their operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal and recurring year-end audit adjustments). Except as reflected in the financial statements of the Company included in the Company SEC Documents, neither the Company nor any of its Subsidiaries has any liabilities or obligations of any nature (whether accrued, absolute, contingent or otherwise) which are required by GAAP to be set forth on a consolidated balance sheet of the Company and its consolidated subsidiaries or in the notes thereto other than any liabilities and obligations (i) incurred since September 30, 2000 in the ordinary course of business, (ii) pursuant to this Agreement and the transactions contemplated hereby or (iii) which, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect. Section 4.7 Information Supplied. Neither the Schedule 14D-9, nor any of the information supplied or to be supplied by the Company or its Subsidiaries or representatives for inclusion or incorporation by reference in the Offer Documents will, at the respective times any such documents or any amendments or supplements thereto are filed with the SEC, are first published, sent or given to stockholders, 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 Company Proxy Statement will not, at the time the Company Proxy Statement is first mailed to the Company's stockholders or, at the time of the Company Stockholders Meeting, 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 14D-9 and the Company Proxy Statement will comply 22 31 as to form in all material respects with the requirements of all applicable laws, including the Exchange Act and the rules and regulations thereunder. No representation or warranty is made by the Company with respect to statements made or incorporated by reference therein based on information supplied by Parent or Merger Subsidiary specifically for inclusion or incorporation by reference therein. Section 4.8 Books and Records. The books of account, minute books, stock record books and other records of the Company and its Subsidiaries are complete and correct in all material respects and have been maintained in accordance with sound business practices and the requirements of Section 13(b)(2) of the Exchange Act, including an adequate system of internal controls. Section 4.9 Inventory. All of the inventories of the Company and each of its Subsidiaries, whether reflected in the audited balance sheet of the Company and its consolidated subsidiaries included in the audited financial statements most recently filed by the Company with the SEC (the "Balance Sheet") or other wise, consist of a quality and quantity usable and salable in the ordinary and usual course of business, except for items of obsolete materials and materials of below- standard quality, all of which have been written off or written down on the Balance Sheet to fair market value or for which adequate reserves have been provided therein. All inventories not written off have been priced at the lower of average cost or market. The quantities of each type of inventory (whether raw materials, work-in-process, or finished goods) are not excessive, but are reasonable and warranted in the present circumstances of the Company and each of its Subsidiaries. All work in process and finished goods inventory is free of any defect or other deficiency. Section 4.10 Absence of Certain Changes or Events. Since September 30, 2000, except as disclosed in the Company SEC Documents filed prior to the date hereof, (i) the Company and each of its Subsidiaries has conducted its respective business only in the ordinary and usual course, (ii) there has not occurred any event or change (including the incurrence of any liabilities of any nature, whether or not accrued, contingent or otherwise) having or reasonably likely to have, individually or in the aggregate, a Company Material Adverse Effect, and (iii) the Company has not taken any action which would have been prohibited under Section 6.1 if such section applied to the period between September 30, 2000 and the date of execution of this Agreement. 23 32 Section 4.11 Litigation. Except as disclosed in the Company SEC Documents or in Section 4.11 of the Company Disclosure Schedule, there is no suit, action or proceeding pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries that, individually or in the aggregate, could reasonably be expected to (i) have a Company Material Adverse Effect, (ii) impair the ability of the Company to perform its obligations under this Agreement or (iii) prevent or materially delay the consummation of any of the transactions contemplated by this Agreement, nor is there any judgment, decree, injunction, rule or order of any Governmental Entity or arbitrator outstanding against the Company or any of its Subsidiaries having, or which, insofar as reasonably can be foreseen, in the future would have, any such effect. Neither the Company nor any of its Subsidiaries is in default under or in violation of, nor is there any valid basis for any claim of default under or violation of, any material contract, commitment or restriction to which it is a party or by which it is bound. The settlement agreement relating to the mass toxic tort and insurance coverage litigation arising from the accident involving the explosion of a rail car at Bogalusa, Louisiana in 1995 (the "Settlement Agreement") is set forth in Section 4.11 of the Company Disclosure Schedule and validly executed by all of the parties thereto and is in full force and effect with respect to each of the parties thereto. Section 4.12 Employee Benefit Plans; ERISA. (a) Section 4.12(a) of the Company Disclosure Schedule contains a true and complete list of each employment, bonus, deferred compensation, incentive compensation, restricted stock, option, performance unit, phantom stock, dental, health, accident, life, accidental death and dismemberment, fringe, cafeteria, scholarship, flexible spending arrangement or reimbursement, group legal services, long term care, dependent care, vacation, paid time off, sick leave, educational assistance, wellness, employee assistance program, adoption assistance, vision, voluntary employees beneficiary association, other insurance, stock purchase, stock option, stock appreciation right or other stock-based incentive, severance, change-in-control, or termination pay, hospitalization or other medical, disability, life or other insurance, supplemental unemployment benefits, profit-sharing, pension, or retirement plan, program, agreement or arrangement and each other employee benefit plan, program, agreement or arrangement, sponsored, maintained or contributed to or required to be contributed to by the Company or any of its Subsidiaries, or by any trade or business, whether or not incorporated (an "ERISA Affiliate"), that together with the Company or any of its Subsidiaries would be deemed a "single employer" within the meaning of Section 4001(b)(1) of the Employee Retirement Income 24 33 Security Act of 1974, as amended ("ERISA"), for the benefit of any current or former employee or director of the Company, or any of its Subsidiaries or any ERISA Affiliate, whether formal or informal and whether legally binding or not (the "Benefit Plans"), and the Company has advised Parent of the dates of original adoption and any amendments to any Benefit Plans adopted or amended since January 1, 2000 in the event that such Benefit Plans contain "change-in-control" or provisions of similar effect that will be triggered by the consummation of the Offer or the Merger. Section 4.12(a) of the Company Disclosure Schedule identifies each of the Benefit Plans that is an "employee welfare benefit plan," or "employee pension benefit plan" as such terms are defined in Sections 3(1) and 3(2) of ERISA (such plans being hereinafter referred to collectively as the "ERISA Plans"). None of the Benefit Plans was entered into, adopted or amended in anticipation of or otherwise in contemplation of the transactions contemplated by this Agreement or any other transaction or potential transaction that had been specifically identified at the time of any such adoption or amendment. (b) With respect to each of the Benefit Plans, the Company has heretofore delivered to the Parent true and complete copies of each of the following documents, as applicable: (i) the Benefit Plans (including all amendments thereto) for each written Benefit Plan or a written description of any Benefit Plan that is not otherwise in writing; (ii) the annual report or Internal Revenue Service Form 5500 Series, if required under ERISA or the Internal Revenue Code of 1986, as amended, (the "Code"), with respect to each ERISA Plan for the last three Plan years ending prior to the date of this Agreement for which such a report was filed; (iii) the actuarial report, if required under ERISA, with respect to each ERISA Plan for the last three Plan years ending prior to the date of this Agreement; (iv) the most recent Summary Plan Description, together with all Summary of Material Modifications issued with respect to such Summary Plan Description, if required under ERISA, with respect to each ERISA Plan, and all other material employee communications relating to each ERISA Plan; 25 34 (v) if the Benefit Plan is funded through a trust or any other funding vehicle, the trust or other funding agreement (including all amendments thereto) and the latest financial statements thereof, if any; (vi) all contracts relating to the Benefit Plans with respect to which the Company, any of its Subsidiaries or any ERISA Affiliate may have any liability, including insurance contracts, investment management agreements, subscription and participation agreements and record keeping agreements; and (vii) the most recent determination letter received from the Internal Revenue Service with respect to each Benefit Plan that is intended to be qualified under Section 401(a) of the Code. (c) No liability under Title IV of ERISA has been incurred by the Company, any of its Subsidiaries or any ERISA Affiliate since the effective date of ERISA that has not been satisfied in full, and to the knowledge of the Company no condition exists that presents a material risk to the Company, or any of its Subsidiaries or any ERISA Affiliate of incurring any liability under such Title, other than liability for premiums due to the Pension Benefit Guaranty Corporation ("PBGC"), which payments have been or will be made when due. Insofar as the representation made in this Section 4.12(c) applies to Section 4064, 4069 or 4204 of ERISA, it is made with respect to any employee benefit plan, program, agreement or arrangement subject to Title IV of ERISA to which the Company, any Subsidiary or any ERISA Affiliate made, or was required to make, contributions during the six-year period ending on the last day of the most recent plan year ended before the date of this Agreement. The PBGC has not instituted proceedings to terminate any Benefit Plan and, to the knowledge of the Company, no condition exists that presents a material risk that such proceedings will be instituted. (d) With respect to each of the ERISA Plans that is subject to Title IV of ERISA, the present value of projected benefit obligations under such Plan, as determined by the Plan's actuary based upon the actuarial assumptions used for funding purposes in the most recent actuarial report prepared by such Plan's actuary with respect to such Plan, did not, as of its latest valuation date, exceed the then current value of the assets of such Plan allocable to such projected benefit obligations. (e) None of the Company, any of its Subsidiaries, any ERISA Affiliate, any of the ERISA Plans, any trust created thereunder, nor to the Company's 26 35 knowledge, any trustee or administrator thereof has engaged in a transaction or has taken or failed to take any action in connection with which the Company, any of its Subsidiaries or any ERISA Affiliate could be subject to any material liability for either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975, 4976 or 4980B of the Code. (f) All contributions and premiums required to be paid under the terms of each of the ERISA Plans and Section 302 of ERISA and Section 412 of the Code, have, to the extent due, been paid in full or properly recorded on the financial statements or records of the Company or its Subsidiaries. No Benefit Plan or any trust established thereunder has incurred any "accumulated funding deficiency" (as defined in Section 302 of ERISA or Section 412 of the Code), whether or not waived. (g) Except as set forth in Section 4.12(g) of the Company Disclosure Schedule, no Plan is a "multiemployer plan," as such term is defined in Section 3(37) of ERISA, nor is any Benefit Plan described in Section 4063(a) of ERISA. Neither the Company, any Subsidiary nor any ERISA Affiliate has made or suffered a "complete withdrawal" or "partial withdrawal", as such terms are respectively defined in Sections 4203 and 4205 of ERISA (or any liability arising therefrom has been satisfied in full). (h) Each of the Benefit Plans has been operated and administered in all material respects in accordance with its terms and applicable laws, including but not limited to ERISA and the Code. (i) The Company has applied for and received a currently effective determination letter from the Internal Revenue Service stating that each of the ERISA Plans that is intended to be "qualified" within the meaning of Section 401(a) of the Code is so qualified and to the knowledge of the Company no event has occurred since the date of such letter which would affect such qualified status. (j) Any Benefit Plan that is intended to satisfy the requirements of Section 501(c)(9) of the Code has so satisfied such requirements. (k) Except as disclosed in Section 4.12(k) of the Company Disclosure Schedule, no amounts payable (individually or collectively and whether in cash, Company Common Stock or other property) under any of the Benefit Plans or any other contract, agreement or arrangement with respect to which the Company or 27 36 any of its Subsidiaries may have any liability could fail to be deductible for federal income tax purposes by virtue of Section 162(m) or Section 280G of the Code. (l) Except as set forth in Section 4.12(l) of the Company Disclosure Schedule, no Benefit Plan provides benefits, including without limitation death or medical benefits (whether or not insured), with respect to current or former employees after retirement or other termination of service (other than (i) coverage mandated by the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, (ii) death benefits or retirement benefits under any "employee pension plan," as that term is defined in Section 3(2) of ERISA, or (iii) deferred compensation benefits accrued as liabilities on the books of the Company or its Subsidiaries). (m) Except as disclosed in Section 4.12(m) of the Company Disclosure Schedule, the consummation of any of the transactions contemplated by this Agreement (including without limitation the commencement or completion of the Offer or the Company Stockholders Meeting (as defined in Section 8.1(b))) will not, either alone or in combination with any other event, (i) entitle any current or former employee, officer, director or consultant of the Company, any of its Subsidiaries or any ERISA Affiliate to severance pay or any other similar termination payment, or (ii) accelerate the time of payment or vesting, or increase the amount of, or otherwise enhance, any benefit due to or otherwise cause a requirement for any payment to any such employee, officer, director or consultant. The aggregate sum of the payment obligations of the Company disclosed in Attachment 4.12(m)(i) of the Company Disclosure Schedule will not exceed $56 million (other than the accelerated vesting of the restricted stock). Other than the Company's Supplemental Executive Retirement Plan, Management Incentive Plan, the phantom stock grants and the agreements to be amended pursuant to Section 7.3(b), no other Benefit Plan provides for benefits that become payable solely by reason of the consummation of the Offer. (n) There are no pending or, to the Company's knowledge, threatened or anticipated claims by or on behalf of any Plan, by any employee or beneficiary under any such Plan or otherwise involving any such Plan (other than routine claims for benefits). (o) Except as disclosed in Section 4.12(o) of the Company Disclosure Schedule or as expressly permitted by this Agreement, since September 30, 2000, there has not been (i) any acceleration, amendment or change of the period 28 37 of exercisability or vesting of any Company Options or restricted stock, stock bonus or other awards under the Option Plans or other equity-based plans (including any discretionary acceleration of the exercise periods or vesting by the Company Board or any committee thereof or any other persons administering an Option Plan or other equity-based plan) or authorization of cash payments in exchange for any Company Options, restricted stock, stock bonus or other awards granted under any of such Option Plans or other equity-based plans or (ii) any adoption or amendment by the Company or any of its Subsidiaries of any collective bargaining agreement or Benefit Plan. None of the Company, any of its Subsidiaries nor any ERISA Affiliate has any formal plan or commitment, whether legally binding or not, to create any additional Plan or modify or change any existing Plan that would affect any current or former employee or director of the Company, any of its Subsidiaries or any ERISA Affiliate. (p) Except with respect to changes required by law, there has been no adoption of, amendment to, written interpretation or announcement (whether or not written) by the Company or any of its Subsidiaries relating to, or change in employee participation or coverage under, any Benefit Plan which would increase materially the expense of maintaining such Benefit Plan above the level of the expense incurred in respect thereof for the fiscal year ended on September 30, 2000. (q) Neither the Company nor any ERISA Affiliate is a party to any agreement or understanding, whether written or unwritten, with the PBGC, the Internal Revenue Service, the Department of Labor or the Health Financing Administration. (r) To the knowledge of the Company, no representations or communications, oral or written, with respect to the participation, eligibility for benefits, vesting, benefit accrual or coverage under any Benefit Plan have been made to employees, directors or agents (or any of their representatives or beneficiaries) of the Company which are not in accordance with the terms and conditions of the Benefit Plans. (s) No "leased employee," as that term is defined in Section 414(n) of the Code, performs services for the Company or any ERISA Affiliate. Neither the Company nor any ERISA Affiliate has used the services or workers provided by third party contract labor suppliers, temporary employees, "leased employees," or individuals who have provided services as independent contractors who have become eligible to participate in the Benefit Plans or used the services of individuals to an extent that would reasonably be expected to result in the 29 38 disqualification of any of the Benefit Plans or the imposition of penalties or excise taxes with respect to the Benefit Plans by the Internal Revenue Service, the Department of Labor, the PBGC, or any other Governmental Entity. Section 4.13 Taxes. As used in this Agreement, "tax" or "taxes" shall include all Federal, state, local and foreign income, property, sales, excise and other taxes, tariffs or governmental charges or assessments of any nature whatsoever as well as any interest, penalties and additions thereto. Except as set forth in Section 4.13 of the Company Disclosure Schedule: (a) The Company and each of its Subsidiaries have duly filed all tax returns, statements, reports and forms required to be filed with any taxing authority (collectively, the "Tax Returns") excluding only such Tax Returns as to which any failure to file does not have a Company Material Adverse Effect on the Company and its Subsidiaries and have duly paid or caused to be duly paid in full or made provision in accordance with GAAP (or there has been paid or provision has been made on their behalf) for the payment of all taxes (as hereinafter defined) for all periods or portions thereof ending through the date hereof. All such Tax Returns are correct and complete and accurately reflect all liability for taxes for the periods covered thereby. All taxes owed and due by the Company and all of its Subsidiaries relating to operations on or prior to September 30, 2000 (whether or not shown on any Tax Return) have been paid or have been adequately reflected on the financial statements. Since September 30, 2000, the Company has not incurred liability for any taxes other than in the ordinary course of business. Neither the Company nor any of its Subsidiaries has received written notice of any claim made by a governmental authority in a jurisdiction where neither the Company nor any of its Subsidiaries file Tax Returns, that the Company is or may be subject to taxation by that jurisdiction. (b) The Company and each of its subsidiaries has withheld and timely paid all taxes required to have been withheld and paid in connection with amounts paid or owing to any employee, independent contractor, creditor, stock- holder, or other third party. (c) The Federal income Tax Returns of the Company and its Subsidiaries have been examined by the Internal Revenue Service (or the applicable statutes of limitation for the assessment of Federal income taxes for such periods have expired) for all periods through and including September 30, 1997, and no material deficiencies were asserted as a result of such examinations that have not 30 39 been resolved or fully paid. The Company has provided Parent with correct and complete copies of its Federal income tax returns for taxable years ending September 30, 1996 through September 30, 2000, and examination reports, and statements of deficiencies with respect to Federal income taxes, if any, assessed against or agreed to by the Company and any of its Subsidiaries with respect to Federal income taxes for taxable years ending September 30, 1996 through September 30, 2000. (d) No Federal, state, local or foreign audits, examinations or other administrative proceedings have been commenced or, to the Company's knowledge, are pending with regard to any taxes or Tax Returns of the Company or of any of its Subsidiaries. No written notification has been received by the Company or by any of its Subsidiaries that such an audit, examination or other proceeding is pending or threatened with respect to any taxes due from or with respect to or attributable to the Company or any of its Subsidiaries or any Tax Return filed by or with respect to the Company or any Company Subsidiary. There is no dispute or claim concerning any tax liability of the Company, or any of its Subsidiaries either claimed or raised by any taxing authority in writing. (e) Neither the Company nor any of its Subsidiaries has waived any statute of limitations in respect of taxes or agreed to any extension of time with respect to a tax assessment or deficiency. (f) Neither the Company nor any of its Subsidiaries has filed a consent pursuant to Section 341(f) of the Code (or any predecessor provision) concerning collapsible corporations, or agreed to have Section 341(f)(2) of the Code apply to any disposition of a "subsection (f) asset" (as such term is defined in Section 341(f)(4) of the Code) owned by the Company or any Company Subsidiary. (g) Neither the Company nor any of its Subsidiaries is a party to any material tax sharing, tax indemnity or other agreement or arrangement with any entity not included in the Company's consolidated financial statements most recently filed by the Company with the SEC. (h) None of the Company or any of its Subsidiaries has been a member of any affiliated group within the meaning of Section 1504(a) of the Code, or any similar affiliated or consolidated group for tax purposes under state, local or foreign law (other than a group the common parent of which is the Company), or has any liability for taxes of any person (other than the Company and its Subsidiaries) 31 40 under Treasury Regulation Section 1.1502-6 or any similar provision of state, local or foreign law as a transferee or successor, by contract or otherwise. (i) As of September 30, 2000, the Company had (i) regular net operating loss carryforwards in the amount of approximately $650 million for Federal income tax purposes, (ii) alternative minimum tax net operating loss carryforwards in the amount of approximately $409 million for Federal income tax purposes, and (iii) alternative minimum tax credits of approximately $5 million. (j) Section 4.13(j) of the Company Disclosure Schedule sets forth the net operating loss carryforwards of the Company and each Subsidiary in each state in which the Company and/or each Subsidiary files an income or franchise tax return. (k) As of the date hereof, none of the net operating loss carryovers, capital loss carryovers, or tax credits of any kind of the Company or any Subsidiary is subject to any limitation on its use under Section 382, 383 or 1502 of the Code, or any provision of any regulation (whether final or temporary) promulgated under such Code provisions. (l) The Company has maintained records and made the required determinations contemplated by the regulations (final and temporary) promulgated under Section 382 of the Code with respect to testing dates, owner shifts, and the determination of whether or not an ownership change has occurred. Except as disclosed on Section 4.13(l) of the Company Disclosure Schedule, as of the date hereof, no ownership change within the meaning of Code Section 382 has occurred with respect to the Company or any Subsidiary. (m) As of the date hereof, the Company has properly computed any restructuring reductions due to bankruptcy to its regular and alternative minimum tax net operating loss carry forwards in accordance with Sections 108 and 382(l)(5) of the Code and the regulations promulgated thereunder. (n) As of the close of the Company's most recent taxable year for Federal income tax purposes, the aggregate adjusted tax basis of the assets of the Company and its Subsidiaries (including only those Subsidiaries which are corporations included in the Company consolidated Federal income tax return), excluding (i) stock of members of the affiliated group of which the Company is the parent corporation, (ii) intercompany advances and indebtedness among such 32 41 members or between any such member and any entity treated as a partnership for Federal income tax purposes, and (iii) the effect of any indebtedness or liability on the tax basis of any equity interest in any entity treated as a partnership for Federal income tax purposes, exceeded $500 million for regular Federal income tax purposes. Section 4.13(n) of the Company Disclosure Schedule sets forth the aggregate adjusted tax basis of the assets of the Company and including its Subsidiaries as of the close of the Company's most recent taxable year for regular Federal income tax purposes. (o) As of the close of the Company's most recent taxable year for Federal income tax purposes, the aggregate adjusted tax basis of the assets of the Company and its Subsidiaries (including only those Subsidiaries which are corporations included in the Company consolidated Federal income tax return), excluding (i) stock of members of the affiliated group of which the Company is the parent corporation, (ii) intercompany advances and indebtedness among such members or between any such member and any entity treated as a partnership for Federal income tax purposes, and (iii) the effect of any indebtedness or liability on the tax basis of any equity interest in any entity treated as a partnership for Federal income tax purposes, exceeded $700 million for Federal alternative minimum tax purposes. Section 4.13(o) of the Company Disclosure Schedule sets forth the aggregate adjusted tax basis of the assets of the Company and including its Subsidiaries as of the close of the Company's most recent taxable year for Federal alternative minimum tax purposes. (p) The Company is the parent corporation of an affiliated group of corporations filing a consolidated Federal income tax return. (q) For Federal and state income tax purposes, the Company uses a taxable year ending September 30. (r) Each partnership (or entity treated as a partnership for Federal income tax purposes) in which the Company or any Subsidiary (including only those Subsidiaries which are corporations included in the Company consolidated Federal income tax return) is a partner has an election under Section 754 of the Code in effect. 33 42 Section 4.14 State Takeover Statutes; Rights Agreement. (a) The Company Board has approved this Agreement, the Stock Option Agreement and the Stockholders Agreement and the consummation of the transactions contemplated hereby and thereby, including the Offer and the Merger, and such approval constitutes approval of this Agreement, the Stock Option Agreement and the Stockholders Agreement and the consummation of the transactions contemplated hereby and thereby, including the Offer and the Merger by the Company Board under the provisions of Section 203 of the DGCL and represents all the action necessary to ensure that such Section 203 does not apply to Parent or Merger Subsidiary in connection with the transactions contemplated hereby and thereby, including the Offer, the Merger and the option to purchase Shares pursuant to the Company Stock Option. To the knowledge of the Company, no other "fair price", "control share acquisition", "moratorium" or other anti-takeover statute or similar statute or regulation, applies or purports to apply to this Agreement, the Stock Option Agreement or the Stockholders Agreement or the transactions contemplated hereby and thereby, including the Offer and the Merger. (b) The Company has amended the Rights Agreement to provide that neither Parent nor any of its affiliates will become an Acquiring Person (defined in the Rights Agreement), that no Distribution Date, Shares Acquisition Date or a Trigger Event (each defined in the Rights Agreement) will occur, and that the Rights will not separate from the underlying shares of Company Common Stock or give the holders thereof the right to acquire securities of any party hereto, in each case as a result of the execution, delivery or performance of this Agreement, the Stock Option Agreement or the Stockholders Agreement or the consummation of the Offer, the Merger or the other transactions contemplated by this Agreement, the Stock Option Agreement or the Stockholders Agreement. Section 4.15 Brokers; Schedule of Fees and Expenses. No broker, investment banker, financial advisor or other person, other than Deutsche Banc Alex. Brown Inc. and Rothschild Inc. the fees of which will be in an aggregate amount of less than $10 million (and a copy of whose engagement letter and a calculation of the fees that would be due thereunder has been provided to Parent), is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement, the Stock Option Agreement or the Stockholders Agreement based upon arrangements made by or on behalf of the Company or any of its Subsidiaries. No such engagement letter obligates the Company to continue to use the services or pay fees or expenses in connection with any future transaction. 34 43 Section 4.16 Permits; Compliance with Laws. Each of the Company and its Subsidiaries has in effect all material Federal, state, local and foreign governmental approvals, authorizations, certificates, filings, franchises, licenses, notices, permits and rights ("Permits") necessary for it to own, lease or operate its properties and assets and to carry on its business as now conducted, and there has occurred no default under any such Permit, except for the absence of Permits and for defaults under Permits which absence or defaults, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect. The Company and its Subsidiaries have been, and are, in compliance with all applicable statutes, laws, ordinances, regulations, rules, judgments, decrees or orders of any Governmental Entity, and neither the Company nor any of its Subsidiaries has received any notice from any Governmental Entity or any other person that either the Company or any of its Subsidiaries is in violation of, or has violated, any applicable statutes, laws, ordinances, regulations, rules, judgments, decrees or orders, except such failures to comply or violations as, individually or in the aggregate, would not reasonably be expected to have a Company Material Adverse Effect. Section 4.17 Environmental Matters. The Company is in compliance in all material respects with applicable Environmental Laws (as defined below), including, without limitation, holding all material permits and authorizations required pursuant to such laws for the ownership and operation of its business as currently conducted and compliance in all material respects with the terms thereof, and has no knowledge of any facts or circumstances that would prevent, interfere with, or materially increase the cost of maintaining such compliance in the future. Neither the Company nor any of its Subsidiaries has (i) placed, held, located, released, transported or disposed of any Hazardous Substance (defined below) on, under, from or at any of the Company's or any of its Subsidiaries' properties or any other properties, other than in a manner that would not require remediation pursuant to applicable Environmental Law, (ii) any knowledge of the presence of any Hazardous Substances that have been released into the environment on, under or at any of the Company's or any of its Subsidiaries' properties other than that which would not require remediation pursuant to applicable Environmental Law, or (iii) received any written notice (A) of any material violation of any applicable Environmental Law that has not been resolved, (B) of the institution or pendency of any material suit, action, claim, proceeding or investigation by any Governmental Entity or any third party in connection with any such violation, (C) requiring the response to or remediation of a release of Hazardous Substances at or arising from any of the Company's or any of its Subsidiaries' properties or any other properties, 35 44 (D) alleging non-compliance by the Company or any of its Subsidiaries with the terms of any permit required under any Environmental Law in any manner reasonably likely to require material expenditures or to result in material liability or (E) demanding payment of a material amount for response to or remediation of a release of Hazardous Substances at or arising from any of the Company's or any of its Subsidiaries' properties or any other properties. There are no past or present facts or circumstances that could reasonably be expected to form the basis of any Environmental Claim against the Company or any of its Subsidiaries or against any person or entity whose liability for any Environmental Claim the Company or any of its Subsidiaries has retained or assumed either contractually or by operation of law, except where such Environmental Claim, if made, would not have a Company Material Adverse Effect. All material permits and other governmental authorizations currently held or required to be held by the Company and its Subsidiaries pursuant to any Environmental Laws are identified in Section 4.17 of the Company Disclosure Schedule. The Company has provided to Parent all material assessments, reports, data, results of investigations or audits, and other material information that is in the possession of or reasonably available to the Company regarding environmental matters pertaining to or the environmental condition of the business of the Company and its Subsidiaries, or the compliance (or noncompliance) by the Company or any of its Subsidiaries with any Environmental Laws. For purposes of this Agreement, the term "Environmental Law" means all federal, state, local and foreign laws and regulations relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata), including, without limitation, laws and regulations relating to emissions, discharges, releases or threatened releases of Hazardous Substances, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Substances as enacted and in effect on or prior to the date hereof; "Hazardous Substance" shall mean any chemical, pollutant, contaminant, waste, petroleum or petroleum product and any material defined as toxic or hazardous or otherwise regulated under any applicable Environmental Law; and "Environmental Claim" shall mean any claim, action, investigation or notice by any person or entity alleging potential liability for investigatory, cleanup or governmental response costs, or natural resources or property damages, or personal injuries, attorney's fees or penalties relating to (i) the presence, or release into the environment, of any Hazardous Substance at any location whether or not owned or operated by the Company or any of its Subsidiaries, now or in the past, or (ii) any violation, or alleged violation, of any Environmental Law. 36 45 Section 4.18 Contracts; Debt Instruments. (a) Except as otherwise disclosed in Section 4.18(a)(i) through (v) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is a party to or subject to: (i) any union contract; (ii) any employment, consulting, severance, termination, or indemnification agreement, contract or arrangement providing for future payments, written or oral, with any current or former officer or director which (1) exceeds $100,000 per annum or (2) requires aggregate annual payments or total payments over the life of such agreement, contract or arrangement to such current or former officer, consultant, director or employee in excess of $100,000 or $500,000, respectively, and is not terminable by it or its Subsidiary on 30 days' notice or less without penalty or obligation to make payments related to such termination; (iii) any joint venture contract or similar arrangement or any other agreement not in the ordinary course of business which has involved or is expected to involve a sharing of revenues of $100,000 per annum or more with other persons; (iv) any lease for real or personal property in which the amount of payments which the Company is required to make on an annual basis exceeds $100,000; (v) to the knowledge of the Company, any material agreement, contract, policy, license, Permit, document, instrument, arrangement or commitment involving revenues to the Company in excess of $500,000 which has not been terminated or performed in its entirety and not renewed which may be, by its terms, terminated by reason of the execution of this Agreement, the Stock Option Agreement or the Stockholders Agreement or the consummation of the Offer, the Merger or the Notes Tender Offers or the other transactions contemplated by this Agreement, the Stock Option Agreement, the Stockholders Agreement or the documents pursuant to which the Notes Tender Offers will be made; or (vi) any agreement, contract, policy, license, Permit, document, instrument, arrangement or commitment that provides for an express non-competition covenant with any person or in any geographic area and which limits in any material respect the ability of the Company to compete in its current business lines. 37 46 (b) All contracts, policies, agreements, leases, licenses, Permits, documents, instruments, arrangements and other commitments listed in Section 4.18(a)(i) through (v) and Section 4.18(c) of the Company Disclosure Schedule or otherwise disclosed in the Company SEC Documents are valid and binding agreements of the Company or a Subsidiary of the Company and are in full force and effect, and neither the Company, any of its Subsidiaries nor, to the knowledge of the Company, any other party thereto, is in default in any material respect under the terms of any such contract, plan, arrangement, agreement, lease, license, Permit, instrument or other commitment. (c) Set forth in Section 4.18(c) of the Company Disclosure Schedule is (A) a list of all loan or credit agreements, notes, bonds, mortgages, indentures and other agreements and instruments pursuant to which any indebtedness of the Company or any of its Subsidiaries in an aggregate principal amount in excess of $1 million is outstanding or may be incurred and (B) the respective principal amounts currently outstanding thereunder. For purposes of this Section 4.18(c), "indebtedness" shall mean, with respect to any person, without duplication, (A) all obligations of such person for borrowed money, or with respect to deposits or advances of any kind to such person, (B) all obligations of such person evidenced by bonds, debentures, notes or similar instruments, (C) all obligations of such person upon which interest charges are customarily paid, (D) all obligations of such person under conditional sale or other title retention agreements relating to property purchased by such person, (E) all obligations of such person issued or assumed as the deferred purchase price of property or services (excluding obligations of such person to creditors for raw materials, inventory, services and supplies incurred in the ordinary course of such person's business), (F) all capitalized lease obligations of such person, (G) all obligations of others secured by any Lien on property or assets owned or acquired by such person, whether or not the obligations secured thereby have been assumed, (H) all obligations of such person under interest rate or currency swap transactions (valued at the termination value thereof), (I) all letters of credit issued for the account of such person (excluding letters of credit issued for the benefit of suppliers to support accounts payable to suppliers incurred in the ordinary course of business), (J) all obligations of such person to purchase securities (or other property) which arises out of or in connection with the sale of the same or substantially similar securities or property, and (K) all guarantees and arrangements having the economic effect of a guarantee of such person of any indebtedness of any other person; and, except as set forth in Section 4.18(c) of the Company Disclosure Schedule, none of the agreements, instruments or obligations set forth in (A) through 38 47 (K) above are affected by the consummation of the Offer or the Merger, or the other transactions contemplated hereby. Section 4.19 Title to Properties. (a) Each of the Company and its Subsidiaries has good and marketable title to, or valid leasehold interests in, all its tangible properties and assets, except for such assets that are no longer used or useful in the conduct of its business, free and clear of all Liens, except for defects in title, easements, restrictive covenants and similar encumbrances or impediments that, in the aggregate, do not and will not materially interfere with the ability of the Company and its Subsidiaries to conduct their business as currently conducted. (b) Each of the Company and its Subsidiaries has complied in all material respects with the terms of all leases to which it is a party and under which it is in occupancy, and all such leases are in full force and effect. Each of the Company and each of its subsidiaries enjoys peaceful and undisturbed possession under all such leases. Section 4.20 Labor and Employment Difficulties. Except as set forth in Section 4.20 of the Company Disclosure Schedule, (a) the Company and all of its Subsidiaries are in material compliance with all applicable laws respecting employment and employment practices, terms and conditions of employment and wages and hours, and are not engaged in any unfair labor practice; (b) within the past twelve months there has been no unfair labor practice charge or complaint filed against the Company or any of its Subsidiaries, and there is no such charge or complaint presently pending before the National Labor Relations Board or any state labor relations agency; (c) there is no labor strike, dispute, slowdown or stoppage actually pending or, to the knowledge of the Company and its Subsidiaries, threatened against the Company or any of its Subsidiaries; (d) to the knowledge of the Company and its Subsidiaries, no representation question exists respecting any employees of the Company or any of its Subsidiaries; (e) no material grievance or arbitration proceeding arising out of or under any collective bargaining agreements is pending; (f) there are no pending employment lawsuits, no pending administrative charges of employment discrimination before the Equal Employment Opportunity Commission or any state fair employment practices agency, and, to the knowledge of the Company, no such threatened lawsuits or charges; (g) there are no pending actions or investigations against the Company or its subsidiaries by the U.S. Department of Labor, or any state labor relations agency, and, to the knowledge of the Company, no such actions or investigations are threatened; (h) in the past twelve months, neither the Company nor any of its Subsidiaries has experienced any work 39 48 stoppage; and (i) in the past twelve months, the Company and its Subsidiaries have not effectuated a "plant closing", "mass layoff" or "employment loss" in violation of the Worker Adjustment and Retraining Notification Act of 1988 (the "WARN Act"). Section 4.21 Opinions of Financial Advisors. The Company has received the opinions of Deutsche Banc Alex. Brown Inc. and Rothschild Inc., dated the date hereof, signed, accurate and complete copies of which have been or promptly will be provided to Parent, to the effect that, as of such date, the consideration to be received by the Company's stockholders pursuant to this Agreement is fair to the Company's stockholders from a financial point of view. The Company has been authorized by Deutsche Banc Alex. Brown Inc. and Rothschild Inc. to permit the inclusion of such opinions in their entirety in the Offer Documents, the Schedule 14D-9 and the Company Proxy Statement so long as such inclusion is in form and substance reasonably satisfactory to each of Deutsche Banc Alex. Brown Inc. and Rothschild Inc., as applicable, and its counsel. Section 4.22 Interests of Officers and Directors. Except as described in the Company SEC Documents, none of the Company's or its Subsidiaries' officers or directors has any material direct or indirect interest in any property, real or personal, tangible or intangible, used in or pertaining to the business of the Company or that of its Subsidiaries, or any supplier, distributor or customer of the Company or any of its Subsidiaries. Section 4.23 Intellectual Property. For purposes of this Section 4.23, "Company Intellectual Property" means all the (i) trademarks, service marks, trade names, Internet domain names, designs, logos, slogans, and general intangibles of like nature, together with all goodwill, registrations and applications related to the foregoing (collectively, "Trademarks"), (ii) patents (including any registrations, continuations, continuations in part, renewals and applications for any of the foregoing), (iii) copyrights (including any registrations and applications for any of the foregoing), (iv) Software and (v) technology, trade secrets and other confidential information, know-how, inventions, proprietary processes, formulae, algorithms, models, and methodologies (collectively, "Trade Secrets") held for use or used in the conduct of the Company's and each of its Subsidiaries' business as currently conducted or contemplated to be conducted. For purposes of this Section 4.23, "Software" means any and all (i) computer programs, including any and all software implementation of algorithms, models and methodologies, whether in source code or object code, (ii) databases and compilations, including any and all data and collections of data, and (iii) all documentation, including user manuals and training 40 49 materials, relating to any of the foregoing and the content and information contained on any website. The Company Intellectual Property is subsisting, in full force and effect, has not been cancelled, expired or abandoned, and is valid and enforceable. (a) Section 4.23(a) of the Company Disclosure Schedule sets forth a complete and accurate list of all of the following that are owned by the Company or any of its Subsidiaries: (i) patents and patent applications, (ii) trademark and service mark registrations (including Internet domain name registrations), trademark and service mark applications and material unregistered trademarks, tradenames and service marks, (iii) copyright registrations, copyright applications and material unregistered copyrights and (iv) Software (other than readily-available commercial software having an acquisition price of less than $25,000). (b) Section 4.23(b) of the Company Disclosure Schedule sets forth a complete and accurate list of all agreements (whether oral or written, and whether between the Company, any of its Subsidiaries and third parties or intercorporate) to which the Company or any of its Subsidiaries is a party or otherwise bound, (i) granting or obtaining any right to use or practice any rights under any Company Intellectual Property (other than licenses for readily available commercial software programs having an acquisition price of less than $25,000), or (ii) restricting the Company's or any of its Subsidiaries' rights to use any Company Intellectual Property, including license agreements, development agreements, distribution agreements, settlement agreements, consent to use agreements, and covenants not to sue (collectively, the "License Agreements"). The License Agreements are valid and binding obligations of the Company, and, to the knowledge of the Company, all other parties thereto, enforceable in accordance with their terms, and there exists no event or condition which will result in a violation or breach of, or constitute (with or without due notice of lapse of time or both) a default by any party under any such License Agreement. Neither the Company nor any of its Subsidiaries have licensed or sublicensed its rights in any Company Intellectual Property other than pursuant to the License Agreements. No royalties, honoraria or other fees are payable by the Company or any of its Subsidiaries to any third parties for the use of or right to use any Company Intellectual Property except pursuant to the License Agreements. (c) Except as set forth on Section 4.23(c) of the Company Disclosure Schedule, the Company or one of its Subsidiaries owns or possesses adequate, valid and enforceable licenses or other rights to use, free and clear of all Liens, all Company Intellectual Property. 41 50 (d) Except as set forth in Section 4.23(d) of the Company Disclosure Schedule, the Company's and its Subsidiaries' ownership, licenses or rights in the Company Intellectual Property (including without limitation its ownership, licenses or rights in Intellectual Property pursuant to the Trademark License Agreement, dated July 7, 1992, between the Company and Mid-America Group Ltd.) will not be affected by the consummation of the Offer or the Merger. The consummation of the Offer or the Merger will not result in the loss or impairment of the Company or any of its Subsidiaries' right to own, use or bring any action for the infringement of, any of the Company Intellectual Property, nor will it require the Consent of any Governmental Entity or third party in respect of any such Company Intellectual Property. (e) To the knowledge of the Company, the conduct of the Company and any of its Subsidiaries' business as currently conducted or planned to be conducted does not conflict with or infringe on (either directly or indirectly such as through contributory infringement or inducement to infringe) any intellectual property rights owned or controlled by any third party. There is no pending or, to the knowledge of the Company, threatened claim, suit, arbitration or other adversarial proceeding before any court, agency, arbitral tribunal or registration authority in any jurisdiction involving the Company Intellectual Property or alleging that the activities or the conduct of the Company's or any Company Subsidiary's businesses infringe upon, violate or constitute the unauthorized use of the intellectual property rights of any third party or challenging the Company or any of its Subsidiaries' ownership, use, validity, enforceability or registrability of any Company Intellectual Property, except for claims, suits, arbitrations or proceedings that individually or in the aggregate would not reasonably be expected to have a Company Material Adverse Effect. There are no settlements, forebearances to sue, consents, judgments, or orders or similar obligations other than the License Agreements which (i) restrict the Company's or any of its Subsidiaries' right to use any Company Intellectual Property, (ii) restrict the Company's or any of its Subsidiaries' businesses in order to accommodate a third party's intellectual property rights or (iii) permit third parties to use any Company Intellectual Property owned or controlled by the Company or any of its Subsidiaries. (f) To the knowledge of the Company, no third party is using misappropriating, infringing, diluting or violating any of the Company Intellectual Property, and no such claims, suits, arbitrations or other adversarial proceedings have been brought or threatened against any third party by the Company or any of its Subsidiaries. 42 51 (g) The Company and each of its Subsidiaries take reasonable measures to protect the confidentiality of Trade Secrets, including requiring their employees and other parties having access thereto to execute written non-disclosure agreements. To the knowledge of the Company, no Trade Secret has been disclosed or authorized to be disclosed to any third party other than pursuant to a non-disclosure agreement that adequately protects the Company and its applicable Subsidiary's proprietary interests in and to such Trade Secrets. To the knowledge of the Company, no party to any non-disclosure agreement relating to its Trade Secrets is in breach or default thereof. Section 4.24 Insurance. The Company and its Subsidiaries have obtained and maintained in full force and effect insurance with responsible and reputable insurance companies or associations in such amounts, on such terms and covering such risks as is reasonably prudent, and each has maintained in full force and effect public liability insurance, insurance against claims for personal injury or death or property damage occurring in connection with the activities of the Company and its Subsidiaries or any properties owned, occupied or controlled by the Company or any of its Subsidiaries, in such amount as reasonably deemed necessary by the Company or any of its Subsidiaries. Section 4.25 Customers and Suppliers. Since June 30, 2001, there has been no termination, cancellation or material curtailment of the business relationship of the Company or any of its Subsidiaries with any customer or supplier or group of affiliated customers or suppliers which individually or in the aggregate would result in a Company Material Adverse Effect nor any written notice of intent to so terminate, cancel or materially curtail (and would have such an effect). Section 4.26 Regulation as a Utility. Except as set forth in Section 4.26 of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries is subject to regulation as a "holding company," electric utility," "public utility," "public utility holding company," or "public service company" (or similar designations) by the United States, any state of the United States, any foreign country or any municipality or any political subdivision of the foregoing. 43 52 Section 4.27 Qualifying Facility. Each of (i) the approximately 50 megawatt project owned and operated by the Company or one of its Subsidiaries and located at Antioch, California and (ii) the approximately 75 megawatt project owned and operated by the Company or one of its Subsidiaries and located at Bogalusa, Louisiana, meets all requirements for a "qualifying facility" under the Public Utility Regulatory Policies Act of 1978, as amended, the Federal Energy Regulatory Commission regulations implemented thereunder and all administrative and judicial precedents relating thereto, including all applicable requirements as to project size (in megawatts), fuel-type, operating and efficiency standards, ownership and useful thermal output. None of the Company or any of its Subsidiaries owns any other electrical generating facilities. ARTICLE V REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUBSIDIARY Parent and Merger Subsidiary jointly and severally hereby represent and warrant to the Company as follows: Section 5.1 Organization, Standing and Corporate Power. Each of Parent and Merger Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has the requisite corporate power and authority to carry on its business as now being conducted. Each of Parent and Merger Subsidiary is duly qualified or licensed to do business and is in good standing in each jurisdiction in which the property owned, leased or operated by it or the nature of the business conducted by it makes such qualification or licensing necessary, other than in such jurisdictions where the failure to be so qualified or licensed and in good standing (individually or in the aggregate) would not have, or be reasonably expected to have, a material adverse effect on the condition (financial or otherwise), business, assets, liabilities, prospects or results of operations of Parent and its Subsidiaries taken as a whole, excluding effects from general economic conditions, general securities market conditions, conditions affecting Parent's industry generally or the announcement of this Agreement or the transactions contemplated hereby (a "Parent Material Adverse Effect"). Parent has delivered or made available to the Company complete and correct copies of its and Merger Subsidiary's Certificate of Incorporation and By-Laws, in each case as amended to the date of this Agreement. 44 53 Section 5.2 Authority; Noncontravention; Filings and Consents. (a) Each of Parent and Merger Subsidiary has the requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by Parent and Merger Subsidiary and the consummation by Parent and Merger Subsidiary of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action on the part of each of Parent and Merger Subsidiary. This Agreement has been duly executed and delivered by each of Parent and Merger Subsidiary and, assuming that this Agreement constitutes a legal, valid and binding obligation of the Company, constitutes a legal, valid and binding obligation of each of Parent and Merger Subsidiary, enforceable against each of them in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and similar laws, now or hereafter in effect, relating to or affecting creditors' rights and remedies and to general principles of equity. (b) The execution and delivery of this Agreement do not, and the consummation of the transactions contemplated by this Agreement and compliance with the provisions of this Agreement will not, conflict with, or result in any violation of, or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a material benefit under, or result in the creation of any Lien upon any of the properties or assets of Parent or any of its Subsidiaries under, (i) the Certificate of Incorporation or By-Laws of Parent or Merger Subsidiary, (ii) any loan or credit agreement, note, bond, mortgage, indenture, lease or other agreement, instrument, permit, concession, franchise or license applicable to Parent or any of its subsidiaries or their respective properties or assets or (iii) subject to the governmental filings and other matters referred to in paragraph (c) below, any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Parent, Merger Subsidiary or any other subsidiary of Parent or their respective properties or assets, other than, in the case of clause (ii) or (iii), any such conflicts, violations, defaults, rights, losses or Liens that individually or in the aggregate would not (x) have a Parent Material Adverse Effect, (y) impair the ability of Parent and Merger Subsidiary to perform their respective obligations under this Agreement or (z) prevent or materially delay the consummation of any of the transactions contemplated by this Agreement. (c) No Consent by any Governmental Entity is required by or with 45 54 respect to Parent or Merger Subsidiary in connection with the execution and delivery by Parent and Merger Subsidiary of this Agreement or the consummation by Parent or Merger Subsidiary of the transactions contemplated by this Agreement, except for (i) the filing of a premerger notification and report form by Parent under the HSR Act and any applicable filings under similar foreign antitrust or competition laws and regulations, (ii) the filing with the SEC of (A) the Offer Documents, and (B) such reports under the Exchange Act as may be required in connection with this Agreement, the Stock Option Agreement, the Stockholders Agreement and the transactions contemplated hereby and thereby, (iii) such filings as may be required under state securities or "blue sky" laws, (iv) the filing of the Certificate of Merger with the Delaware Secretary of State and appropriate documents with the relevant authorities of other states in which the Company is qualified to do business, and (v) such other consents, approvals, orders, authorizations, registrations, declarations and filings the failure of which to be made or obtained individually or in the aggregate would not (x) have a Parent Material Adverse Effect, (y) impair the Parent's or Merger Subsidiary's ability to perform its obligations under this Agreement or (z) prevent or materially delay the consummation of the transactions contemplated by this Agreement. Section 5.3 Information Supplied. Neither the Offer Documents nor any of the information supplied or to be supplied by Parent or its Subsidiaries or representatives for inclusion or incorporation by reference in the Schedule 14D-9 or the Company Proxy Statement will, at the respective times any such documents or any amendments or supplements thereto are filed with the SEC, are first published, sent or given to stockholders or become effective under the Securities Act or, in the case of the Company Proxy Statement, at the time of the Company Stockholders Meeting, 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 Offer Documents will comply as to form in all material respects with the requirements of all applicable laws, including the Exchange Act and the rules and regulations thereunder. No representation or warranty is made by Parent or Merger Subsidiary with respect to statements made or incorporated by reference therein based on information supplied by the Company for inclusion or incorporation by reference therein. 46 55 Section 5.4 Brokers. No broker, investment banker, financial advisor or other person, other than Salomon Smith Barney Inc., the fees and expenses of which will be paid by Parent, is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement or the Stockholders Agreement based upon arrangements made by or on behalf of Parent or Merger Subsidiary. Section 5.5 No Prior Activities; Assets of Merger Subsidiary. Merger Subsidiary was formed solely for the purpose of the Merger and engaging in the transactions contemplated hereby. As of the date hereof and the Effective Time, except for obligations or liabilities incurred in connection with its incorporation or organization and the transactions contemplated hereby and activities, agreements or arrangements in connection with the transactions contemplated hereby, Merger Subsidiary has not and will not have (i) incurred, directly or indirectly through any of its subsidiaries or affiliates, any obligations or liabilities, (ii) engaged in any business or activities of any type or kind whatsoever or (iii) entered into any agreements or arrangements with any person. Section 5.6 Sufficient Funds. Either Parent or Merger Subsidiary has available, or has obtained commitment letters (copies of which have heretofore been provided to the Company) from financial institutions to borrow, sufficient funds to pay the Merger Consideration, to purchase the Notes pursuant to the Notes Tender Offers and to pay all fees and expenses related to the Merger. Section 5.7 No Vote Required. No vote of any class or series of Parent's or Merger Subsidiary's capital stock is necessary to approve this Agreement, the Offer, the Notes Tender Offers, the Merger or the other transactions contemplated hereby. ARTICLE VI COVENANTS OF THE COMPANY Section 6.1 Conduct of Business. The Company covenants and agrees that prior to the earlier of (i) the Effective Time and (ii) the time the directors designated by the Parent have been elected to, and shall constitute a majority of, the Company Board pursuant to Section 1.4 hereof (the "Appointment Date"), except (i) as expressly provided in this Agreement, (ii) as set forth in Section 6.1 of the Company Disclosure Schedule, or (iii) as agreed in writing by Parent, after the date hereof: 47 56 (a) the Company shall, and shall cause its Subsidiaries to, carry on their respective businesses in the usual, regular and ordinary course in substantially the same manner as heretofore conducted and, to the extent consistent therewith, use all reasonable efforts to preserve intact their current business organizations, keep available the services of their current officers and employees and preserve their relationships with customers, suppliers, distributors and others having business dealings with them to the end that their goodwill and ongoing businesses shall be unimpaired at the Effective Time; (b) neither the Company nor any of its Subsidiaries shall (i) amend its Certificate of Incorporation or By-laws or similar organizational document, (ii) issue, deliver, sell, pledge or otherwise encumber any shares of its capital stock, any other voting securities or any securities convertible into, or any rights, warrants or options to acquire, any such shares, voting securities or convertible securities (other than the issuance of Company Common Stock (1) upon the exercise of Company Options outstanding on the date of this Agreement, (2) upon the exercise of Company Warrants outstanding on the date of this Agreement or (3) pursuant to the Rights Agreement), (iii) declare, set aside or pay any dividends on, or make any other distributions in respect of, any of its capital stock, (iv) split, combine or reclassify any of its capital stock or issue or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of its capital stock, or (v) purchase, redeem or otherwise acquire any shares of capital stock of the Company or any of its Subsidiaries or any other securities thereof or any rights, warrants or options to acquire any such shares or other securities; (c) neither the Company nor any of its Subsidiaries shall (i) incur or modify any indebtedness or other liability, other than in the ordinary and usual course of business and consistent with past practice; or (ii) modify, amend or terminate any of its material contracts or waive, release or assign any material rights or claims, except in the ordinary course of business and consistent with past practice; (d) neither the Company nor any of its Subsidiaries shall (i) incur or assume any indebtedness (either long-term or short-term), except indebtedness under the Company's revolving credit facilities that when added to all other outstanding indebtedness of the Company (as shown on Exhibit B, which shall be updated and delivered to the Parent from time to time pursuant to a request of the Parent) shall not exceed $985 million at any time prior to the Appointment Date, 48 57 provided, that in no event shall any such indebtedness be used to purchase or repay any of the Notes (other than scheduled interest payments thereon); (ii) modify the terms of any indebtedness or other liability unless agreed to in writing by Parent (which agreement shall not be unreasonably withheld or delayed); (iii) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person, except as described in Section 6.1(d) of the Company Disclosure Schedule and which are in the ordinary course of business and consistent with past practice; (iv) make any loans, advances or capital contributions to, or investments in, any other person (other than to or in wholly owned Subsidiaries of the Company), except in the ordinary course of business and consistent with past practice to employees for reasonable Company related expenses (e.g., reasonable travel advances and moving expenses); or (v) enter into any material commitment or transaction (including, but not limited to, any capital expenditure or purchase, sale or lease of assets or real estate), except capital expenditures no greater than $7 million in the aggregate between September 1, 2001 and December 31, 2001 and except for sales of inventory in the ordinary course of business and consistent with past practice; (e) neither the Company nor any of its Subsidiaries shall transfer, lease, license, sell, mortgage, pledge, dispose of, or encumber any assets other than in the ordinary and usual course of business and consistent with past practice; (f) except as shall be required by any applicable employment agreement or collective bargaining agreement in effect on the date hereof and set forth in Section 6.1(f) of the Company Disclosure Schedule, neither the Company nor any of its Subsidiaries shall make any change in the compensation payable or to become payable to any of its officers, directors, employees, agents or consultants (other than normal recurring increases in wages to employees who are not officers or directors or affiliates in the ordinary course of business consistent with past practice) or to persons providing management services, or enter into or amend any employment, severance, consulting, termination or other agreement or employee benefit plan or make any loans to any of its officers, directors, employees (except as permitted in Section 6.1(d)), affiliates, agents or consultants or make any change in its existing borrowing or lending arrangements for or on behalf of any of such persons pursuant to an employee benefit plan or otherwise; (g) neither the Company nor any of its Subsidiaries shall (i) pay or make any accrual or arrangement for payment of any pension, retirement allowance or other employee benefit pursuant to any existing plan, agreement or arrangement to 49 58 any officer, director, employee or affiliate or pay or agree to pay or make any accrual or arrangement for payment to any officers, directors, employees or affiliates of the Company of any amount relating to unused vacation days, except payments and accruals made in the ordinary course of business consistent with past practice; (ii) adopt or pay, grant, issue, accelerate or accrue salary or other payments or benefits pursuant to any pension, profit-sharing, bonus, extra compensation, incentive, deferred compensation, stock purchase, stock option, stock appreciation right, group insurance, severance pay, retirement or other employee benefit plan, agreement or arrangement, or any employment or consulting agreement with or for the benefit of any director, officer, employee, agent or consultant, whether past or present (for the avoidance of doubt, nothing in this Section 6.1(g)(ii) shall prevent the Company from making ordinary payments of salary and fulfilling contractual obligations existing on the date hereof); or (iii) amend in any material respect any such existing plan, agreement or arrangement in a manner inconsistent with the foregoing; (h) neither the Company nor any of its Subsidiaries shall permit any insurance policy naming it as a beneficiary or a loss payable payee to be cancelled or terminated without notice to Parent, except policies providing coverage for losses not in excess of $100,000; (i) neither the Company nor any of its Subsidiaries shall enter into any contract or transaction relating to the purchase of assets other than in the ordinary course of business consistent with prior practices; (j) neither the Company nor any of its Subsidiaries shall pay, repurchase, discharge or satisfy any of its claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction in the ordinary course of business and consistent with past practice, of claims, liabilities or obligations reflected or reserved against in, or contemplated by, the consolidated financial statements (or the notes thereto) of the Company and its consolidated subsidiaries; (k) neither the Company nor any of its Subsidiaries will adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company or any of its Subsidiaries (other than the Merger); (l) neither the Company nor any of its Subsidiaries will (i) change any of the accounting methods used by it unless required by GAAP, the Code or 50 59 Regulation S-X promulgated under the Exchange Act or (ii) make any material election relating to taxes, change any material election relating to taxes already made, adopt any material accounting method relating to taxes, change any material accounting method relating to taxes unless required by GAAP or the Code, enter into any closing agreement relating to taxes, settle any claim or assessment relating to taxes or consent to any claim or assessment relating to taxes or any waiver of the statute of limitations for any such claim or assessment; (m) neither the Company nor any of its Subsidiaries will take, or agree to commit to take, any action that would or is reasonably likely to result in any of the conditions to the Offer set forth in Annex I or any of the conditions to the Merger set forth in Article IX not being satisfied, or would make any representation or warranty of the Company contained herein inaccurate in any respect at, or as of any time prior to, the Effective Time, or that would materially impair the ability of the Company, Parent, Merger Subsidiary or the holders of Shares to consummate the Offer or the Merger in accordance with the terms hereof or materially delay such consummation; (n) neither the Company nor any of its Subsidiaries will plan, announce, implement or effect any material reduction in labor force, lay-off, early retirement program, severance program or other program or effort concerning the termination of employment of employees of the Company or its Subsidiaries; (o) neither the Company nor any of its Subsidiaries will enter into an agreement, contract, commitment or arrangement to do any of the foregoing, or to authorize, recommend, propose or announce an intention to do any of the foregoing; and (p) the Company shall take all reasonable actions to obtain judicial approval of the Settlement Agreement. Section 6.2 State Takeover Statutes. The Company and the Company Board shall (i) take all reasonable actions necessary to ensure that no "fair price", "control share acquisition", "moratorium" or other anti-takeover statute, or similar statute or regulation, is or becomes applicable to this Agreement, the Stock Option Agreement or the Stockholders Agreement, or the Offer, the Merger or any of the other transactions contemplated hereby or thereby and (ii) if any "fair price", "control share acquisition", "moratorium" or other anti-takeover statute, or similar statute or regulation, becomes applicable to this Agreement, the Stock Option 51 60 Agreement or the Stockholders Agreement, or the Offer, the Merger or any other transaction contemplated hereby or thereby, take all action necessary to ensure that the Offer, the Merger and the other transactions contemplated hereby and thereby, may be consummated as promptly as practicable on the terms contemplated hereby and otherwise to minimize the effect of such statute or regulation on the Offer, the Merger and the other transactions contemplated hereby and thereby. Section 6.3 Access to Information. Subject to applicable law and upon reasonable request, the Company shall, and shall cause each of its Subsidiaries to, afford to Parent and to Parent's officers, employees, accountants, counsel, financial advisers and other representatives, full access during normal business hours during the period prior to the Effective Time to all their respective properties, books, contracts, commitments, personnel (including for the purpose of interviewing such personnel in connection with the integration process) and records and their accountants' work papers and, during such period, the Company shall, and shall cause each of its Subsidiaries to, furnish promptly to Parent (i) a copy of each report, schedule, registration statement and other document filed by it during such period pursuant to the requirements of Federal or state securities laws, (ii) a copy of each material tax return, report and information statement filed by it during such period, and (iii) all other information concerning its business, assets, properties and personnel as Parent may reasonably request; provided that no investigation pursuant to this Section 6.3 shall affect any representation or warranty given by the Company to Parent hereunder. Any investigation pursuant to this Section 6.3 shall be conducted in such a manner as not to interfere unreasonably with the conduct of the business of the Company. Unless otherwise required by law and until the Effective Time, Parent will hold any such information which is nonpublic in confidence in accordance with the provisions of the Confidentiality Agreement. Following the execution of this Agreement, Parent and the Company shall cooperate with each other and make all reasonable efforts to minimize any disruption to the business which may result from the announcement of the transactions contemplated hereby. Section 6.4 No Solicitation by the Company. (a) Neither the Company nor any of its Subsidiaries or affiliates shall (and the Company shall cause the officers, directors, employees, representatives and agents of the Company, each of its Subsidiaries and each affiliate of the Company, including, but not limited to, investment bankers, attorneys and accountants, not to), directly or indirectly, encourage, solicit, participate in or initiate discussions or negotiations with, or provide any information to, any person or group (other than 52 61 Parent, any of its affiliates or representatives) concerning any Acquisition Proposal (defined below in Section 6.4(c)), except that nothing contained in this Section 6.4 or any other provision hereof shall prohibit the Company or the Company Board from (i) taking and disclosing to the Company's stockholders a position with respect to a tender or exchange offer by a third party pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act, or (ii) making such disclosure to the Company stockholders as, in the good faith judgment of the Board, after receiving advice from outside counsel, is required under applicable law, provided that the Company may not, except as permitted by Section 6.4(b), withdraw or modify, or propose to withdraw or modify, the Recommendations or its position with respect to the Offer or the Merger or approve or recommend, or propose to approve or recommend any Acquisition Proposal, or enter into any agreement with respect to any Acquisition Proposal. Upon execution of this Agreement, the Company will immediately cease any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any of the foregoing. Notwithstanding the foregoing, prior to the time of acceptance of Shares for payment pursuant to the Offer, the Company may furnish information concerning its business, properties or assets to any corporation, partnership, person or other entity or group pursuant to appropriate confidentiality agreements, and may negotiate and participate in discussions and negotiations with such entity or group concerning an Acquisition Proposal if: (x) such entity or group has on an unsolicited basis submitted a bona fide written proposal to the Company Board relating to any such transaction which the Company Board determines in good faith, represents a superior transaction to the transactions contemplated hereby and which is not subject to the receipt of any necessary financing; and (y) in the opinion of the Company Board such action is required to discharge the Company Board's fiduciary duties under applicable law, determined only after receipt of (i) advice from the Company's investment banking firm that the Acquisition Proposal is superior, from a financial point of view, to the Offer and the Merger (which advice may include analysis of the enterprise value if the Company's Board has been advised by independent legal counsel that its fiduciary duties requires them to do so), and (ii) advice from independent legal counsel to the 53 62 Company that the failure to provide such information or access or to engage in such discussions or negotiations would cause the Company Board to violate its fiduciary duties under applicable law. The Company will promptly, but in any event within one business day, notify Parent of the existence of any proposal, discussion, negotiation or inquiry received by the Company, and the Company will promptly, but in any event within one business day, communicate to Parent the terms of any proposal, discussion, negotiation or inquiry which it may receive (and will immediately provide to Parent copies of any written materials received by the Company in connection with such proposal, discussion, negotiation or inquiry) and the identity of the party making such proposal or inquiry or engaging in such discussion or negotiation. The Company will promptly provide to Parent any non-public information concerning the Company provided to any other party which was not previously provided to Parent. (b) Except as set forth below in this subsection (b), neither the Company Board nor any committee thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a manner adverse to Parent or Merger Subsidiary, the Recommendations or the approval by the Company Board or any such committee of the Offer, this Agreement or the Merger, (ii) approve or recommend or propose to approve or recommend, any Acquisition Proposal or (iii) enter into any agreement with respect to any Acquisition Proposal. Notwithstanding the foregoing, prior to the time of acceptance for payment of Shares pursuant to the Offer, the Company Board may withdraw or modify its approval or recommendation of the Offer, this Agreement or the Merger, approve or recommend a Superior Proposal (as defined in Section 6.4(c)), or enter into an agreement with respect to a Superior Proposal, in each case at any time after the fifth business day following Parent's receipt of written notice from the Company advising Parent that the Company Board has received a Superior Proposal which it intends to accept, specifying the material terms and conditions of such Superior Proposal, identifying the person making such Superior Proposal, but only if the Company shall have caused its financial and legal advisors to negotiate with Parent to make such adjustments in the terms and conditions of this Agreement as would enable the Company to proceed with the transactions contemplated herein on such adjusted terms. (c) As used herein, "Acquisition Proposal" shall mean any proposal or offer to acquire all or a substantial part of the business or properties of the Company or any of its Subsidiaries or 15% or more of any capital stock of the Company or any of its Subsidiaries, whether by merger, tender offer, exchange offer, 54 63 sale of assets or similar transactions involving the Company or any Subsidiary, division or operating or principal business unit of the Company. "Superior Proposal" shall mean an Acquisition Proposal which satisfies both subsection (x) and subsection (y) of Section 6.4(a). Section 6.5 Litigation. The Company shall give Parent the opportunity to participate (at Parent's own cost) in the defense of any litigation against the Company and/or its directors relating to the transactions contemplated by this Agreement, the Stock Option Agreement and the Stockholders Agreement. Section 6.6 Rights Agreement. Except as expressly required by this Agreement, the Company shall not, without the prior consent of Parent, amend the Rights Agreement or take any other action with respect to, or make any determination under, the Rights Agreement, including a redemption of the Rights or any action to facilitate an Acquisition Proposal. Section 6.7 Certain Obligations of the Company. The Company shall have delivered documents satisfactory to the Parent evidencing that the Company's obligations in respect of (i) the benefits disclosed in Attachment 4.12(m)(i) of the Company Disclosure Schedule do not exceed $56 million and (ii) broker's or advisory fees as referred to in Section 4.15 do not exceed $10 million. ARTICLE VII COVENANTS OF PARENT AND MERGER SUBSIDIARY Section 7.1 Indemnification. From and after the Effective Time, the Surviving Corporation will indemnify and hold harmless (including advancement of expenses) the current and former directors and officers of the Company and its wholly-owned Subsidiaries and Gaylord Container de Mexico, S.A. de C.V. (the "Indemnified Parties") in respect of claims made within six years following the Effective Time for acts or omissions occurring on or prior to the Effective Time to the extent provided in the Company's Certificate of Incorporation, By-Laws and indemnity agreements in effect on the date hereof; provided that such indemnification shall be subject to any limitation imposed from time to time under applicable law. Parent will cause to be maintained for a period of not less than four years from the Effective Time, at Parent's election either (i) the Company's current directors' and officers' insurance and indemnification policy to the extent that it 55 64 provides coverage for events occurring prior to the Effective Time (the "D&O Insurance") for all Indemnified Parties, (ii) a new policy providing substantially similar coverage, or (iii) a "tail" policy on the Company's existing D&O Insurance, so long as the annual premium therefor would not be in excess of 150% of the amount per annum the Company paid in its last full fiscal year, which amount has been disclosed to Parent, on terms and conditions substantially similar to the existing D&O Insurance. If the existing D&O Insurance cannot be maintained, expires or is terminated or canceled during such four-year period, Parent will use reasonable efforts to cause to be obtained as much D&O Insurance as can be obtained for the remainder of such period for an annualized premium not in excess 150% of the amount per annum the Company paid in its last full fiscal year, on terms and conditions substantially similar to the existing D&O Insurance. This Section 7.1 shall survive the consummation of the Merger at the Effective Time, is intended to benefit the Company and the Indemnified Parties, shall be binding on all successors and assigns of the Surviving Corporation and shall be enforceable by the Indemnified Parties. This Section 7.1 shall not limit or otherwise adversely affect any rights any Indemnified Party may have under any agreement with the Company or under the Company's Certificate of Incorporation or By-Laws. If Parent, Merger Subsidiary or the Surviving Corporation or any of their respective successors or assigns (i) consolidates with or merges into any other person or shall not be the continuing or surviving corporation or entity in such consolidation or merger or (ii) transfers all or substantially all its properties and assets to any Person, then, and in each case, proper provision shall be made so that the successors and assigns of Parent, Merger Subsidiary or the Surviving Corporation, as the case may be, honor the indemnification obligations set forth in this Section 7.1. Section 7.2 Obligations of Merger Subsidiary. Parent will take all action necessary to cause Merger Subsidiary to perform its obligations under this Agreement (including ensuring that Merger Subsidiary will at the appropriate times have sufficient funds to consummate the Offer and the Merger) and to consummate the Offer, the Notes Tender Offers and the Merger on the terms and conditions set forth in this Agreement. Section 7.3 Employees. (a) During the period commencing on the Effective Time and ending on the first anniversary thereof, Parent shall cause the Surviving Corporation to provide employees of the Company and the Company's Subsidiaries who were employees of the Company or the Company's subsidiaries immediately before the 56 65 Effective Time with employee benefits that are substantially no less favorable in the aggregate than either those currently provided by the Company and the Company's Subsidiaries to such employees as of the date of this Agreement or those provided from time to time by Parent and its Subsidiaries to their other similarly situated employees; provided, however, that, during such one-year period, the benefit provided to any such employee under any tax-qualified defined benefit pension plan in which the employee participates shall be no less than that determined under the formula in effect under the Gaylord Container Retirement Plan as in effect on the date hereof taking into account both (i) the years of service recognized for such employee under such Retirement Plan as of the Closing Date and (ii) such employee's service with Parent, the Surviving Corporation, or any Subsidiary of Parent after the Closing Date during such one-year period; provided, further, that nothing in this Section 7.3 shall restrict Parent's or the Surviving Corporation's ability to change any Benefit Plans in the future. (b) To the extent that any benefit would become payable in respect of consummation of the Offer under any Benefit Plan required to be disclosed in Section 4.12(m) of the Company Disclosure Schedule, the Company shall, prior to the initial expiration of the Offer, take all actions necessary: (i) to the extent it may unilaterally do so, to amend all such Benefit Plans to provide that any benefit that would have been required to be paid in respect of the Offer will instead become payable in respect of the Merger; (ii) to the extent not amended under the preceding clause (i), to amend all Benefit Plans with respect to each individual listed on Section 7.3(b)(ii) of the Company Disclosure Schedule such that any benefit that would have been required to be paid in respect of the Offer will instead become payable in respect of the Merger; (iii) to amend the Company's Supplemental Executive Retirement Plan and the phantom stock grants to the extent such Benefit Plans apply to any individuals not listed on Section 7.3(b)(ii) of the Company Disclosure Schedule, such that any benefit that would have been required to be paid in respect of the Offer will instead become payable in respect of the Merger, but, with respect to the Supplemental Executive Retirement Plan, providing such individuals with a payment for the time value of money in respect of the period between the Offer and the Merger using a discount rate based on U.S. treasuries with the most comparable maturities such that no benefit under that plan has been reduced (provided that nothing in this Agreement shall prohibit the Company from continuing to make periodic payments under and in accordance with the Supplemental Executive Retirement Plan to any individual listed on Section 7.3(b)(iii) of the Company Disclosure Schedule who is receiving such periodic payments as of the date of this Agreement until such time as such individual's benefit is paid out in full by reason of 57 66 the consummation of the Merger); and (iv) to use commercially reasonable efforts to obtain the consent of each affected individual to amend the Company's Management Incentive Plan and each Severance Compensation Agreement (as amended) with respect to such individual, to the extent it applies to any individuals not listed on Section 7.3(b)(ii) of the Company Disclosure Schedule, such that any benefit that would have been required to be paid in respect of the Offer will instead become payable in respect of the Merger (it being understood that the failure to obtain the consent of any such beneficiary, after a good faith effort, shall not be deemed a breach of this clause (iv)). After the Appointment Date and prior to the Effective Date, Parent agrees not to, and to cause the Company not to, terminate the employment of any of the individuals listed in Section 7.3(b)(iv) of the Company Disclosure Schedule or any individual who consents to the amendments described in clause (iv) above. (c) From and after the Effective Time, Surviving Corporation and its wholly-owned Subsidiaries, as applicable, shall honor each Benefit Plan that provides for severance (including without limitation change of control and termination agreements) in accordance with its terms (as amended in accordance with subsection (b) above, if applicable); provided that nothing in this subsection (c) shall prevent Parent or the Surviving Corporation from causing such Benefit Plan to be amended or terminated in accordance with its terms. (d) For purposes of any employee benefit plan or arrangement maintained by Parent, the Surviving Corporation or any Subsidiary of Parent, Parent shall recognize (or cause to be recognized) service with the Company and the Company's Subsidiaries and any predecessor entities (and any other service credited by the Company under similar benefit plans) for purposes of vesting and eligibility to participate; provided that the retirement benefit shall be calculated as provided in Section 7.3(a) hereof. 58 67 ARTICLE VIII ADDITIONAL AGREEMENTS Section 8.1 Stockholder Approval; Preparation of Company Proxy Statement. (a) If approval of the Company's stockholders is required by applicable law in order to consummate the Merger other than pursuant to Section 253 of the DGCL, the Company shall, as promptly as practicable following the acceptance of Shares pursuant to the Offer, prepare and file with the SEC the Company Proxy Statement. No filing of, or amendment or supplement to, or correspondence to the SEC will be made by the Company without providing the Parent with a reasonable opportunity to review and comment thereon. The Company will advise Parent, promptly after it receives notice thereof, of any request by the SEC for the amendment of the Company Proxy Statement or comments thereon and responses thereto or requests by the SEC for additional information. If at any time prior to the Company Stockholders Meeting any information relating to the Company or Parent, or any of their respective affiliates, officers or directors, should be discovered by the Company or Parent which should be set forth in an amendment or supplement to the Company Proxy Statement, so that it would not include any misstatement of a material fact or omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, the party which discovers such information shall promptly notify the other parties hereto and an appropriate amendment or supplement describing such information shall be promptly filed with the SEC and, to the extent required by law, disseminated to the stockholders of the Company. (b) If approval of the Company's stockholders is required by applicable law in order to consummate the Merger other than pursuant to Section 253 of the DGCL, the Company shall as promptly as practicable following the acceptance of Shares pursuant to the Offer duly call, give notice of, convene and hold a meeting of its stockholders (the "Company Stockholders Meeting") for the purpose of considering and taking action upon this Agreement and the Merger. Once the Company Stockholders Meeting has been called and noticed, the Company shall not postpone or adjourn the Company Stockholders Meeting (other than for the absence of a quorum) without the consent of Parent. Subject to the Company's right, pursuant to Section 6.4(b) hereof, to withdraw or modify the Recommendations, the Company Board shall include in the Company Proxy Statement a copy of the Recommendations as such Recommendations pertain to the Merger and this Agreement. Notwithstanding the foregoing, the Company Board shall submit this Agreement and the Merger for approval to the Company's stockholders whether or not the Company Board determines in accordance with Section 6.4(b) after the date hereof that this Agreement and the Merger are no longer advisable and recommends that the stockholders of the Company reject it. The Company shall use its best 59 68 efforts to solicit from stockholders of the Company proxies in favor of this Agreement and the Merger and shall take all other actions necessary or advisable to secure the vote or consent of stockholders required by the DGCL to effect the Merger. (c) Notwithstanding the foregoing clauses (a) and (b) above, in the event that Merger Subsidiary shall acquire at least 90% of the outstanding Shares in the Offer, the parties hereto shall take all necessary actions to cause the Merger to become effective, as soon as practicable after the expiration of the Offer, without a meeting of stockholders of the Company, in accordance with Section 253 of the DGCL. Section 8.2 HSR Act Filings; Reasonable Efforts; Notification. (a) Each of Parent and the Company shall (i) promptly (but in no event later than five business days after the date of the first public announcement of this Agreement) make or cause to be made the filings required of such party or any of its Subsidiaries under the HSR Act and any other Antitrust Laws (as defined in Section 8.2(b)) with respect to the Offer, the Merger and the other transactions contemplated by this Agreement, the Stock Option Agreement and the Stockholders Agreement, (ii) comply at the earliest practicable date with any request under the HSR Act or such other Antitrust Laws for additional information, documents, or other material received by such party or any of its Subsidiaries from the Federal Trade Commission or the Department of Justice or any other Governmental Entity in respect of such filings, the Offer, the Merger or such other transactions, and (iii) cooperate with the other party in connection with any such filing and in connection with resolving any investigation or other inquiry of any such agency or other Governmental Entity under any Antitrust Laws with respect to any such filing, the Offer, the Merger or such other transactions. Each party shall promptly inform the other party of any communication with, and any proposed understanding, undertaking, or agreement with, any Governmental Entity regarding any such filings, the Offer, the Merger or such other transactions. Neither party shall participate in any meeting with any Governmental Entity in respect of any such filings, investigation, or other inquiry without giving the other party notice of the meeting and, to the extent permitted by such Governmental Entity, the opportunity to attend and participate. (b) Each of Parent and the Company shall use all reasonable efforts to resolve such objections, if any, as may be asserted by any Governmental Entity with respect to the Offer, the Merger or any other transactions provided for in this Agreement, the Stock Option Agreement or the Stockholders Agreement under 60 69 the HSR Act, the Sherman Act, as amended, the Clayton Act, as amended, the Federal Trade Commission Act, as amended, and any other Federal, state or foreign statutes, rules, regulations, orders or decrees that are designed to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade (collectively, "Antitrust Laws"). In connection therewith, if any administrative or judicial action or proceeding is instituted (or threatened to be instituted) challenging the Offer, the Merger or any other transactions provided for in this Agreement or the Stockholders Agreement as violative of any Antitrust Law, and, if by mutual agreement, Parent and the Company decide that litigation is in their best interests, each of Parent and the Company shall cooperate and use all reasonable efforts vigorously to contest and resist any such action or proceeding and to have vacated, lifted, reversed, or overturned any decree, judgment, injunction or other order, whether temporary, preliminary or permanent (each an "Order"), that is in effect and that prohibits, prevents, or restricts consummation of the Offer, the Merger or any such other transactions. Each of Parent and the Company shall use all reasonable efforts to take such action as may be required to cause the expiration of the notice periods under the HSR Act or other Antitrust Laws with respect to the Offer, the Merger and such other transactions as promptly as possible after the execution of this Agreement. (c) Each of the parties agrees to 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 Offer, the Notes Tender Offers, the Merger, and the other transactions contemplated by this Agreement and the Stockholders Agreement, including (i) the obtaining of all other necessary actions or nonactions, waivers, consents and approvals from Governmental Entities and the making of all other necessary registrations and filings (including other filings with Governmental Entities, if any), (ii) the obtaining of all necessary consents, approvals or waivers from third parties, (iii) the preparation of the Offer Documents, the Schedule 14D-9 and, if necessary, the Company Proxy Statement, and (iv) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement and the Stockholders Agreement. (d) Notwithstanding anything to the contrary in Section 8.2(a), (b) or (c), (i) neither Parent nor any of its Subsidiaries shall be required to divest any of their respective businesses, product lines or assets, (ii) neither Parent nor any of its Subsidiaries shall be required to take or agree to take any other action or agree to any 61 70 limitation that could reasonably be expected to have a Parent Material Adverse Effect, (iii) neither the Company nor its Subsidiaries shall be required to divest any of their respective businesses, product lines or assets, or to take or agree to take any other action or agree to any limitation that could reasonably be expected to have a Company Material Adverse Effect, (iv) no party shall be required to agree to the imposition of or to comply with, any condition, obligation or restriction on Parent or any of its Subsidiaries or on the Surviving Corporation or any of its Subsidiaries of the type referred to in subclause (iii) or (iv) of clause (a) of Annex I, and (v) neither Parent nor Merger Subsidiary shall be required to waive any of the conditions to the Offer set forth in Annex I and none of the Parent, Merger Subsidiary or the Company shall be required to waive any of the conditions to the Merger set forth in Article IX. (e) The Company shall give prompt notice to Parent, and Parent or Merger Subsidiary shall give prompt notice to the Company, of (i) any representation or warranty made by it contained in this Agreement becoming untrue or inaccurate in any material respect or (ii) the failure by it to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement; provided, however, that no such notification shall affect the representations, warranties, covenants or agreements of the parties or the conditions to the obligations of the parties under this Agreement. (f) The Company shall give prompt notice to Parent, and Parent or Merger Subsidiary shall give prompt notice to the Company, of: (i) any notice or other communication from any person alleging that the consent of such person is or may be required in connection with the transactions contemplated by this Agreement, the Stock Option Agreement or the Stockholders Agreement; (ii) any notice or other communication from any Governmental Entity in connection with the transactions contemplated by this Agreement, the Stock Option Agreement or the Stockholders Agreement; and (iii) any actions, suits, claims, investigations or proceedings commenced or, to the best of its knowledge threatened against, relating to or involving or otherwise affecting it or any of its Subsidiaries which, if pending on the date of this Agreement would have been required to have been disclosed pursuant to Article IV or which relate to the consummation of the transactions contemplated by this Agreement, the Stock Option Agreement or the Stockholders Agreement. 62 71 Section 8.3 Public Announcements. Parent and Merger Subsidiary, on the one hand, and the Company, on the other hand, will consult with each other before issuing, and provide each other the opportunity to review and comment upon, any press release or other public statements with respect to the transactions contemplated by this Agreement, including the Offer, the Notes Tender Offers and the Merger, 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. The parties agree that the initial press release to be issued with respect to the transactions contemplated by this Agreement will be a joint press release accept able to Parent and the Company. Section 8.4 Confidentiality. Each of Parent and the Company will hold, and will cause its Representatives (defined in the Confidentiality Agreement, dated January 19, 2000 (the "Confidentiality Agreement"), between Parent and the Company) to hold, any Confidential Information (as defined in the Confidentiality Agreement) in confidence in accordance with the terms of the relevant Confidentiality Agreement. ARTICLE IX CONDITIONS PRECEDENT Section 9.1 Conditions to Each Party's Obligation to Effect the Merger. The respective obligations of each party to effect the Merger are subject to the satisfaction or, to the extent permitted by applicable law, waiver on or prior to the Closing Date of each of the following conditions: (a) Stockholder Approval. If required by the DGCL, this Agreement and the Merger shall have been approved and adopted by the Company Stockholder Vote. (b) Purchase of Shares in the Offer. Merger Subsidiary shall have accepted for payment and purchased all Shares validly tendered and not withdrawn pursuant to the Offer. (c) HSR Approval. The applicable waiting period under the HSR 63 72 Act and any applicable foreign antitrust or competition laws and regulations shall have expired or been terminated. (d) No Injunctions or Restraints. No judgment, order, decree, statute, law, ordinance, rule or regulation, entered, enacted, promulgated, enforced or issued by any court or other Governmental Entity of competent jurisdiction or other legal restraint or prohibition shall be in effect preventing or prohibiting consummation of the Merger. ARTICLE X TERMINATION Section 10.1 Termination. The transactions contemplated by this Agreement may be terminated or abandoned at any time prior to the Effective Time, whether before or after stockholder approval thereof: (a) Subject to Section 1.4(c), by the mutual written consent of Parent and the Company; (b) By either of the Company or Parent: (i) if (x) the Offer shall have been terminated or expired without any Shares being purchased pursuant thereto or (y) Merger Subsidiary shall not have accepted for payment any Shares pursuant to the Offer by December 28, 2001; provided, however, that the right to terminate this Agreement under this Section 10.1(b)(i) 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 Merger Subsidiary to purchase the Shares pursuant to the Offer on or prior to such date; or (ii) if any Governmental Entity shall have issued an order, decree or ruling or taken any other action (which order, decree, ruling or other action the parties hereto shall use their reasonable efforts to lift), which permanently restrains, enjoins or otherwise prohibits the acceptance for payment of, or payment for, Shares pursuant to the Offer or the Merger and such order, decree, ruling or other action shall have become final and non-appealable. (c) By the Company: 64 73 (i) in connection with entering into a definitive agreement as permitted by Section 6.4(b), provided the Company has complied with all provisions thereof, including the notice provisions therein, and that the Company makes simultaneous payment to Parent of funds as required by Section 11.1(b); or (ii) if Parent or Merger Subsidiary shall have breached in any material respect any of their respective representations, warranties, covenants or other agreements contained in this Agreement, which breach cannot be or has not been cured, in all material respects, within 10 days after the giving of written notice of such breach to Parent or Merger Subsidiary, as applicable. (d) By Parent: (i) if, prior to the purchase of Shares by Merger Subsidiary pursuant to the Offer, the Company Board shall have withdrawn, modified or changed in a manner adverse to Parent or Merger Subsidiary the Recommendations or its approval of the Offer, this Agreement or the Merger or shall have recommended an Acquisition Proposal or shall have executed an agreement in principle or definitive agreement relating to an Acquisition Proposal or similar business combination with a person or entity other than Parent, Merger Subsidiary or their affiliates; or (ii) if prior to the purchase of Shares pursuant to the Offer, the Company shall have breached any representation, warranty, covenant or other agreement contained in this Agreement which would give rise to the failure of a condition set forth in paragraph (f) or (g) of Annex I hereto; or (iii) the Offer is not commenced within 5 business days after the first public announcement of this Agreement because of the failure of any of the conditions set forth in Annex I being satisfied; or (iv) there is a failure to satisfy the condition set forth in clause (j) of Annex I within 20 business days following commencement of the Offer. 65 74 Section 10.2 Effect of Termination. In the event of the termination or abandonment of the transactions by any party hereto pursuant to the terms of this Agreement, written notice thereof shall forthwith be given to the other party or parties specifying the provision hereof pursuant to which such termination or abandonment of the transactions is made, and there shall be no liability on the part of the Parent, Merger Subsidiary or the Company except (A) for fraud or willful breach of this Agreement prior to such termination or abandonment of the transactions and (B) as set forth in Section 11.1. ARTICLE XI GENERAL PROVISIONS Section 11.1 Fees and Expenses. (a) Except as specifically provided to the contrary in this Agreement, including Section 11.1(b), all costs and expenses incurred in connection with this Agreement and the consummation of the transactions shall be paid by the party incurring such expenses. (b) In the event that: (i) the Company shall terminate or abandon the transactions pursuant to Section 10.1(c)(i); or (ii) (x) either the Company or Parent terminates or abandons the transactions pursuant to Section 10.1(b)(i) and prior thereto there shall have been publicly announced another Acquisition Proposal; or (y) Parent shall terminate or abandon the transactions pursuant to Section 10.1(d)(i) or (ii); then the Company shall pay to Parent an amount equal to $20 million (the "Termination Fee") plus an amount equal to Parent's actual and reasonably documented out-of-pocket fees and expenses incurred by Parent and Merger Subsidiary in connection with the Offer, the Notes Tender Offers, the Merger, this Agreement and the consummation of the transactions contemplated hereby up to a maximum amount of $2.5 million in the aggregate (the "Expense Reimbursement"). The Termination Fee and Expense Reimbursement shall be paid in same day funds concurrently with the execution of an agreement referred to in subsection (i) above or in the case of clause (ii) above no later than the date of consummation of any 66 75 Acquisition Proposal within 12 months of the termination of this Agreement; provided, however, if an Acquisition Proposal is not consummated within 12 months of the termination of this Agreement, no such payments required by clause (ii) above shall be required to be paid. Notwithstanding anything herein to the contrary, no Termination Fee or Expense Reimbursement shall be payable if Parent or Merger Subsidiary was in material breach of its representations, warranties or obligations under this Agreement at the time its right to terminate this Agreement accrued. Section 11.2 Amendment and Modification. Subject to applicable law and Section 1.4(c), this Agreement may be amended, modified and supplemented in any and all respects, whether before or after any vote of the stockholders of the Company contemplated hereby, by written agreement of the parties hereto, by action taken by their respective Boards of Directors (which in the case of the Company shall include approvals as contemplated in Section 1.4(c)), at any time prior to the Closing Date with respect to any of the terms contained herein; provided, however, that after the approval of this Agreement by the stockholders of the Company, no such amendment, modification or supplement shall reduce the amount or change the form of the Merger Consideration. Section 11.3 Extension; Waiver. Subject to Section 1.4(c), at any time prior to the Effective Time, the parties may (a) extend the time for the performance of any of the obligations or other acts of the other parties, (b) waive any inaccuracies in the representations and warranties contained in this Agreement or in any document delivered pursuant to this Agreement or (c) subject to the proviso of Section 11.2, waive compliance with any of the agreements or conditions contained in this Agreement. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by each of the parties hereto. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. Section 11.4 Nonsurvival of Representations and Warranties. None of the representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Effective Time. This Section 11.4 shall not limit any covenant or agreement of the parties which by its terms contemplates performance after the Effective Time. 67 76 Section 11.5 Notices. All notices, requests 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) or by telecopy (with copies by overnight courier) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to Parent or Merger Subsidiary, to Temple-Inland Inc. 303 South Temple Drive Diboll, TX 75941 Attention: M. Richard Warner Fax: 936-829-3333 with a copy to (which shall not constitute notice): Skadden, Arps, Slate, Meagher & Flom LLP 1440 New York Avenue, N.W. Washington, DC 20005 Attention: Stephen W. Hamilton, Esq. Fax: 202-393-5760 (b) if to the Company, to Gaylord Container Corporation 500 Lake Cook Road Suite 400 Deerfield, IL 60015 Attention: Daniel P. Casey Fax: 847-405-5628 with a copy to (which shall not constitute notice): Kirkland & Ellis 200 East Randolph Drive Chicago, IL 60601 Attention: William S. Kirsch, P.C. John A. Schoenfeld Fax: 312-861-2200 68 77 Section 11.6 Interpretation. When a reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for 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". References herein to the "knowledge of the Company" shall mean the knowledge of the executive officers of the Company after reasonable inquiry. Section 11.7 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. Section 11.8 Entire Agreement; No Third-Party Beneficiaries. This Agreement, the Stock Option Agreement, the Stockholders Agreement and the Confidentiality Agreement (including the documents and the instruments referred to herein and therein): (a) constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and thereof, and (b) except as provided in Section 7.1 are not intended to confer upon any person other than the parties hereto and thereto any rights or remedies hereunder. Section 11.9 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without giving effect to the principles of conflicts of law thereof. Section 11.10 Assignment. 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; any instrument purporting to make such assignment shall be void. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns. 69 78 Section 11.11 Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were 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 specifically the terms and provisions of this Agreement in any court of the United States located in the State of Delaware or in Delaware state court, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (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, (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 (c) agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court other than a Federal or state court sitting in the State of Delaware. Section 11.12 Severability. Any term or provision of this Agreement that is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction or other authority declares that any term or provision hereof is invalid, void or unenforceable, the parties agree that the court making such determination shall have the power to reduce the scope, duration, area or applicability of the term or provision, to delete specific words or phrases, or to replace any invalid, void or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision. 70 79 IN WITNESS WHEREOF, Parent, Merger Subsidiary and the Company have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of the date first written above. TEMPLE-INLAND INC. By: /s/ M. Richard Warner ------------------------------ Name: M. Richard Warner Title: Vice President and Chief Administrative Officer TEMPLE-INLAND ACQUISITION CORPORATION By: /s/ M. Richard Warner ------------------------------ Name: M. Richard Warner Title: Vice President GAYLORD CONTAINER CORPORATION By: /s/ Marvin A. Pomerantz ------------------------------ Name: Marvin A. Pomerantz Title: Chairman 80 Annex I Certain Conditions of the Offer. Notwithstanding any other provisions of the Offer, and in addition to (and not in limitation of) Merger Subsidiary's rights to extend and amend the Offer at any time in its sole discretion (subject to the provisions of the Agreement), Merger Subsidiary shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to Merger Subsidiary's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), pay for, and may delay the acceptance for payment of or, subject to the restriction referred to above, the payment for, any tendered Shares, and may terminate or amend the Offer as to any Shares not then paid for, if (i) any applicable waiting period under the HSR Act has not expired or terminated, (ii) the Minimum Stock Condition has not been satisfied, (iii) the Minimum Note Condition has not been satisfied, or (iv) at any time on or after the date of the Agreement and before the acceptance for payment of Shares, any of the following events shall occur and be continuing: (a) there shall be threatened or pending any suit, action or proceeding by any Governmental Entity (i) seeking to prohibit or impose any material limitations on Parent's or Merger Subsidiary's ownership or operation (or that of any of their respective Subsidiaries or affiliates) of all or a material portion of their or the Company's businesses or assets, or to compel Parent or Merger Subsidiary or their respective Subsidiaries and affiliates to dispose of or hold separate any material portion of the business or assets of the Company or Parent and their respective Subsidiaries, in each case taken as a whole, (ii) challenging the acquisition by Parent or Merger Subsidiary of any Shares under the Offer or pursuant to the Stock Option Agreement or the Stockholders Agreement or the acquisition by Parent or Merger Subsidiary of any Notes pursuant to the Notes Tender Offers, seeking to restrain or prohibit the making or consummation of the Offer, the Merger, the Notes Tender Offers or the performance of any of the other transactions contemplated by the Merger Agreement, the Stock Option Agreement, the Stockholders Agreement or the agreements and documents governing the Notes Tender Offers, or seeking to obtain from the Company, Parent or Merger Subsidiary any damages that are material in relation to the Company and its Subsidiaries taken as a whole, (iii) seeking to impose material limitations on the ability of Merger Subsidiary, or rendering Merger Subsidiary unable, to accept for payment, pay for or purchase some or all of the Shares pursuant to the Offer and the Merger or some or all of the Notes pursuant to the Notes Tender Offers, (iv) seeking to impose material limitations on the ability of Merger Subsidiary or Parent effectively to exercise full rights of ownership of the Shares, including, I-1 81 without limitation, the right to vote the Shares purchased by it on all matters properly presented to the Company's stockholders or to exercise full rights of ownership of the Notes, or (v) which otherwise is reasonably likely to have a Company Material Adverse Effect; or (b) there shall be any statute, rule, regulation, judgment, order or injunction enacted, entered, enforced, promulgated or deemed applicable to the Offer or the Merger, or any other action shall be taken by any Governmental Entity, that is reasonably likely to result, directly or indirectly, in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above; or (c) there shall have occurred (i) any general suspension of trading in, or limitation on prices for, securities on the New York Stock Exchange, American Stock Exchange or in the Nasdaq National Market, for a period in excess of three hours (excluding any coordinated trading halt triggered solely as a result of a specified decrease in a market index for a period of less than two days and suspensions or limitations resulting solely from physical damage or interference with such exchanges not related to market conditions), (ii) a declaration of a banking moratorium or any suspension of payments in respect of banks in the United States (whether or not mandatory), (iii) a commencement of a war, armed hostilities or other international or national calamity directly or indirectly involving the United States, (iv) any limitation (whether or not mandatory) by any United States or foreign governmental authority on the extension of credit by banks or other financial institutions, (v) a change in general financial bank or capital market conditions which materially or adversely affects the ability of financial institutions in the United States to extend credit or syndicate loans, or (vi) in the case of any of the foregoing existing at the time of the commencement of the Offer, a material acceleration or worsening thereof; or (d) there shall have occurred a Company Material Adverse Effect; or (e) the Company Board or any committee thereof (i) shall have withdrawn, modified or changed in a manner adverse to Parent or Merger Subsidiary its approval or recommendation of the Offer, the Merger Agreement or the Merger, (ii) shall have recommended the approval or acceptance of an Acquisition Proposal from, or similar business combination with, a person or entity other than Parent, Merger Subsidiary or their affiliates, or (iii) shall have executed an agreement in principle or definitive agreement relating to an Acquisition Proposal from, or similar business combination with, a person or entity other than Parent, Merger Subsidiary or their affiliates; or I-2 82 (f) any of the representations and warranties of the Company set forth in the Merger Agreement that are qualified as to materiality shall not be true and correct and any such representations and warranties that are not so qualified shall not be true and correct in any material respect, in each case as of the date of the Merger Agreement and as of the scheduled expiration of the Offer, such that the aggregate effect of all such breaches of representations and warranties shall have had or is reasonably likely to have a Company Material Adverse Effect and such breach has not been cured within 10 days after Parent gives written notice thereof to the Company or the representations and warranties set forth in Sections 4.12(m) and 4.15 and the last sentence of Section 4.11 of the Merger Agreement shall not be true and correct; or (g) the Company shall have failed to perform in any material respect any material obligation or to comply in any material respect with any agreement or covenant of the Company to be performed or complied with by it under the Merger Agreement and such breach has not been cured within 10 days after Parent gives written notice thereof to the Company; or (h) all consents necessary to the consummation of the Notes Tender Offers, the Offer or the Merger including, without limitation, consents from parties to loans, contracts, leases or other agreements shall not have been obtained, other than consents the failure of which to obtain would not have a material adverse effect on the Company and its Subsidiaries, taken as a whole; or (i) the Merger Agreement shall have been terminated in accordance with its terms; or (j) in the 20 business days following commencement of the Offer, the environmental due diligence conducted by Parent shall have discovered a condition or conditions at one or more of the Company's converting facilities or the Company's mills located in Pine Bluff, Arkansas, Bogalusa, Louisiana and Antioch, California (in the case of the Pine Bluff and Bogalusa mills, such due diligence investigation is to be conducted in accordance with the procedures set forth on Exhibit C attached hereto) that in the reasonable judgment of Parent will require remediation or other expenditures in an aggregate amount in excess of $5 million, with respect to the converting facilities and the Pine Bluff and Bogalusa mills, and in excess of $10 million, with respect to the Antioch mill; which in the sole judgment of Parent or Merger Subsidiary, in any such case, and regardless of the circumstances (including any action or inaction by Parent or Merger Subsidiary) I-3 83 giving rise to such condition makes it inadvisable to proceed with the Notes Tender Offers or the Offer and/or with such acceptance for payment of or payment for Shares. The foregoing conditions are for the sole benefit of Parent and Merger Subsidiary, may be waived by Parent or Merger Subsidiary, in whole or in part, at any time and from time to time in the sole discretion of Parent or Merger Subsidiary. The failure by Parent or Merger Subsidiary at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right and each such right shall be deemed an ongoing right which may be asserted at any time and from time to time. I-4
EX-99.(D)(2) 13 d90566ex99-d2.txt STOCKHOLDERS AGREEMENT DATED 9/27/01 1 EXECUTION COPY STOCKHOLDERS AGREEMENT THIS STOCKHOLDERS AGREEMENT (this "Agreement"), dated September 27, 2001, by and among Temple-Inland Inc., a Delaware corporation ("Parent"), Temple-Inland Acquisition Corporation, a Delaware corporation and an indirect wholly-owned subsidiary of Parent ("Merger Subsidiary"), and each of Mid-America Group, Ltd., Marvin A. Pomerantz, Warren J. Hayford, Daniel P. Casey, Mary Sue Coleman, Harve A. Ferrill, John E. Goodenow, David B. Hawkins, Charles S. Johnson, Jerry W. Kolb, Ralph L. MacDonald Jr., Michael J. Keough, Lawrence G. Rogna, and Jeffrey B. Park (each in his individual capacity, a "Stockholder", and collectively, the "Stockholders"). WITNESSETH WHEREAS, each of the Stockholders is, as of the date hereof, the record and beneficial owner of that number of shares of Class A Common Stock, par value $.0001 per share (the "Company Common Stock"), of Gaylord Container Corporation, a Delaware corporation (the "Company"), set forth on Schedule 1(a) hereto; WHEREAS, Parent, Merger Subsidiary and the Company concurrently with the execution and delivery of this Agreement are entering into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), providing for, among other things, the acquisition of the Company by Parent by means of a cash tender offer (the "Offer") for all of the outstanding shares of Company Common Stock and for the subsequent merger (the "Merger") of Merger Subsidiary with and into the Company upon the terms and subject to the conditions set forth in the Merger Agreement; and WHEREAS, as a condition to the willingness of Parent and Merger Subsidiary to enter into the Merger Agreement, and in order to induce Parent and Merger Subsidiary to enter into the Merger Agreement, the Stockholders have agreed to enter into this Agreement. NOW, THEREFORE, in consideration of the execution and delivery by Parent and Merger Subsidiary of the Merger Agreement and the foregoing and the 2 mutual representations, warranties, covenants 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 the Stockholders. Each of the Stockholders hereby represents and warrants to Parent and Merger Subsidiary, severally and not jointly, as follows: (a) Such Stockholder is the record and beneficial owner of the shares of Company Common Stock (as may be adjusted from time to time pursuant to Section 6 hereof, the "Shares") set forth opposite his name on Schedule 1(a) to this Agreement and such Shares represent all of the Shares beneficially owned (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) by such Stockholder. For purposes of this Agreement, the term "Shares" shall include any shares of Company Common Stock issued to the Stockholder upon exercise of any stock options that are currently exercisable or become exercisable, restricted stock and any other shares of Company Common Stock such Stockholder may acquire or beneficially own during the term of this Agreement. Schedule 1(a) lists all options and shares of restricted stock issued to the Stockholders. (b) Such Stockholder has all requisite power and authority and, if an individual, the legal capacity, to execute and deliver this Agreement and to consummate the transactions contemplated hereby. This Agreement has been validly executed and delivered by such Stockholder and, assuming that this Agreement constitutes the legal, valid and binding obligation of the other parties hereto, constitutes the legal, valid and binding obligation of Stockholder, enforceable against such Stockholder in accordance with its terms. (c) The execution and delivery of this Agreement by such Stockholder do not, and the consummation of the transactions contemplated by and compliance with the provisions of this Agreement will not, (i) conflict with the Certificate of Incorporation or By-laws or similar organizational documents of such Stockholder as presently in effect (in the case of a Stockholder that is a legal entity), (ii) conflict with or violate any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to such Stockholder or by which it is bound or affected, (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, contract, indenture, note or instrument to which such Stockholder is a party or by which it is 2 3 bound or affected, except for such breaches, defaults or other occurrences that would not prevent or materially delay the performance by Stockholder of such Stockholder's obligations under this Agreement, or (iv) except for applicable requirements, if any, of the Exchange Act, require any filing by such Stockholder with, or any permit, authorization, consent or approval of, any governmental or regulatory authority, except where the failure to make such filing or obtain such permit, authorization, consent or approval would not prevent or materially delay the performance by Stockholder of such Stockholder's obligations under this Agreement. (d) The Shares and the certificates representing the Shares owned by such Stockholder are now and at all times during the term hereof will be held by such Stockholder, or by a nominee or custodian for the benefit of such 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. (e) As of the date hereof, neither the Stockholder, nor any of its respective properties or assets is subject to any order, writ, judgment, injunction, decree, determination or award that would prevent or delay the consummation of the transactions contemplated hereby. (f) There are no options or rights to acquire, or any agreements to which the Stockholder is a party relating to any of the Shares, other than as set forth in this Agreement. (g) Except as set forth on Schedule 1(g), no Stockholder, directly or indirectly, owns any of the Company's 9-3/8% Senior Notes due 2007, 9-3/4% Senior Notes due 2007 or 9-7/8% Senior Subordinated Notes due 2008 (collectively, the "Notes"). Section 2. Representations and Warranties of Parent and Merger Subsidiary. Each of Parent and Merger Subsidiary hereby, jointly and severally, represents and warrants to the Stockholders as follows: (a) Each of Parent and Merger Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Each of Parent and Merger Subsidiary has all requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agree- 3 4 ment. This Agreement has been duly executed and delivered by each of Parent and Merger Subsidiary and constitutes the legal, valid and binding obligation of each of Parent and Merger Subsidiary, enforceable against each of them in accordance with its terms. (b) The execution and delivery of this Agreement by each of Parent and Merger Subsidiary do not, and the consummation of the transactions contemplated by and compliance with the provisions of this Agreement will not, (i) conflict with or violate the Certificate of Incorporation or By-laws of either of Parent or Merger Subsidiary, in each case as amended to the date of this Agreement, (ii) conflict with or violate any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Parent or Merger Subsidiary or by which either is bound or affected, (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, contract, indenture, note or instrument to which Parent or Merger Subsidiary is a party or by which either is bound or affected or (iv) except for applicable requirements, if any, of the HSR Act and the Exchange Act or any foreign antitrust and competition laws and regulations, require any filing by Parent or Merger Subsidiary with, or any permit, authorization, consent or approval of, any governmental or regulatory authority. Section 3. Purchase and Sale of the Shares. Each of the Stockholders hereby agrees that it shall tender the Shares into the Offer promptly, and in any event no later than the tenth business day following the commencement of the Offer pursuant to Section 1.1 of the Merger Agreement, and that such Stockholder shall not withdraw any Shares so tendered unless the Offer is terminated or has expired. Merger Subsidiary hereby agrees to purchase all the Shares so tendered at a price per Share equal to the Merger Consideration (as defined in the Merger Agreement) or any higher price that may be paid in the Offer; provided, however, that Merger Subsidiary's obligation to accept for payment and pay for the Shares in the Offer is subject to all the terms and conditions of the Offer set forth in the Merger Agreement and Annex I thereto. Section 4. Restrictions on Dispositions. Prior to the termination of this Agreement, except as otherwise provided herein, none of the Stockholders shall: (i) directly or indirectly, transfer (which term shall include, without limitation, for the purposes of this Agreement, any sale, gift, pledge or other disposition), or consent to any transfer of, any or all of the Shares or any interest therein; (ii) enter into any contract, option or other agreement or understanding with respect to any transfer of 4 5 any or all of the Shares or any interest therein; (iii) grant any proxy, power-of-attorney or other authorization or consent in or with respect to the Shares; (iv) deposit the Shares into a voting trust or enter into a voting agreement or arrangement with respect to the Shares or (v) take any other action that would in any way restrict, limit or interfere with the performance of such Stockholder's obligations hereunder or the transactions contemplated hereby. Section 5. Grant of Irrevocable Proxy; Appointment of Proxy. (a) Each of the Stockholders hereby irrevocably grants to, and appoints, Parent and any nominee thereof, its proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of such Stockholder, to vote the Shares, or grant a consent or approval in respect of the Shares, in connection with any meeting of the stockholders of the Company (i) in favor of the Merger, and (ii) against any action or agreement which would impede, interfere with or prevent the Merger, including any other extraordinary corporate transaction, such as a merger, reorganization or liquidation involving the Company and a third party or any other proposal of a third party to acquire the Company. (b) Such Stockholder represents that any proxies heretofore given in respect of the Shares, if any, are not irrevocable, and that such proxies are hereby revoked. (c) Such Stockholder hereby affirms that the irrevocable proxy set forth in this Section 5 is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of such Stockholder under this Agreement. Such Stockholder hereby further affirms that the irrevocable proxy is coupled with an interest and, except as set forth in Section 8 hereof, is intended to be irrevocable in accordance with the provisions of Section 212(e) of the Delaware General Corporation Law. Section 6. Adjustments Upon Share Issuances, Changes in Capitalization, etc. In the event of any change in Company Common Stock or in the number of outstanding shares of Company Common Stock by reason of a stock dividend, split-up, recapitalization, combination, exchange of shares or similar transaction or any other change in the corporate or capital structure of the Company (including, without limitation, the declaration or payment of an extraordinary dividend of cash, securities or other property), the number of Shares shall be adjusted appropriately, and this Agreement and the obligations hereunder shall attach to any additional shares of 5 6 Company Common Stock or other securities or rights of the Company issued to or acquired by each of the Stockholders. Section 7. Tender of Notes. Each of the Stockholders listed on Schedule 1(g) hereto hereby agrees that it shall tender promptly its Notes into the separate tender offers for the Notes (the "Notes Tender Offers") being made by Parent or its designee concurrently with the Offer pursuant to the Offer to Purchase and Consent Solicitation Statement dated September 28, 2001 (as amended or supplemented from time to time, the "Notes Offer to Purchase"), and in any event no later than the tenth business day following the commencement of the Notes Tender Offers pursuant to Section 1.2 of the Merger Agreement, and that such Stockholder shall not withdraw any Notes so tendered unless the Notes Tender Offers are terminated or have expired. Parent or its designee hereby agrees to purchase all the Notes so tendered at a purchase price (per $1,000 principal amount) as set forth in the Notes Offer to Purchase or any higher price that may be paid in the Notes Tender Offers; provided, however, that Parent's or its designee's obligation to accept for payment and pay for the Notes in the Notes Tender Offers is subject to all the terms and conditions of the Notes Tender Offers set forth in the Merger Agreement and Annex I thereto. Section 8. Further Assurances. Each of the Stockholders shall, upon request of Parent or Merger Subsidiary, execute and deliver any additional documents and take such further actions as may reasonably be deemed by Parent or Merger Subsidiary to be necessary or desirable to carry out the provisions hereof and to vest the power to vote the Shares as contemplated by Section 5 hereof in Parent. Section 9. Termination. This Agreement, and all rights and obligations of the parties hereunder and the proxies provided hereby, shall terminate immediately upon the earlier of (a) the termination of the Merger Agreement in accordance with its terms, (b) the Effective Time (as defined in the Merger Agreement), or (c) the written mutual consent of the parties hereto; provided, however, that Section 10 shall survive any termination of this Agreement. Section 10. Expenses. All costs and expenses incurred in connection with this Agreement and the consummation of the transactions contemplated hereby shall paid by the party incurring such costs or expenses. Section 11. Miscellaneous. 6 7 (a) Definitions. Capitalized terms used and not otherwise defined in this Agreement shall have the respective meanings assigned to such terms in the Merger Agreement. (b) Amendment. This Agreement may not be amended except by an instrument in writing signed by the parties hereto and specifically referencing this Agreement. (c) Notices. All notices, requests 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) or by telecopy (with copies by overnight courier) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): i. if to Parent or Merger Subsidiary, to Temple-Inland Inc. 303 South Temple Drive Diboll, TX 75941 Attention: M. Richard Warner, Esq. Fax: 936-829-3333 with a copy to (which shall not constitute notice): Skadden, Arps, Slate, Meagher & Flom LLP 1440 New York Avenue, N.W. Washington, DC 20005 Attention: Stephen W. Hamilton, Esq. Fax: 202-393-5760 ii. if to the Stockholders, to Gaylord Container Corporation 500 Lake Cook Road, Suite 400 Deerfield, IL 60015 Attention: Daniel P. Casey Fax: 847-405-5628 with a copy to (which shall not constitute notice): 7 8 Kirkland & Ellis 200 East Randolph Drive Chicago, IL 60601 Attention: William S. Kirsch, P.C. John A. Schoenfeld Fax: 312-861-2200 (d) Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. (e) Entire Agreement; No Third-Party Beneficiaries. This Agreement and the Merger Agreement (including the documents and the instruments referred to herein and therein): (i) constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, and (ii) are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. (f) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without giving effect to the principles of conflicts of law thereof. (g) Assignment. 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; any instrument purporting to make such assignment shall be void. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns. (h) Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were 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 specifically the terms and provisions of this Agreement in any court of the United States located in the State of Delaware or in Delaware state court, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (i) consents to submit itself to the personal jurisdiction of any Federal court located in 8 9 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, (ii) 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 (iii) agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court other than a Federal or state court sitting in the State of Delaware. (i) Severability. Any term or provision of this Agreement that is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction or other authority declares that any term or provision hereof is invalid, void or unenforceable, the parties agree that the court making such determination shall have the power to reduce the scope, duration, area or applicability of the term or provision, to delete specific words or phrases, or to replace any invalid, void or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision. [Signature pages follow] 9 10 IN WITNESS WHEREOF, Parent, Merger Subsidiary and the Stockholders have caused this Agreement to be duly executed and delivered as of the date first written above. TEMPLE-INLAND INC. By: /s/ M. Richard Warner --------------------------------- Name: M. Richard Warner Title: Vice President and Chief Administrative Officer TEMPLE-INLAND ACQUISITION CORPORATION By: /s/ M. Richard Warner --------------------------------- Name: M. Richard Warner Title: Vice President MID-AMERICA GROUP, LTD. By: /s/ Marvin A. Pomerantz --------------------------------- Name: Marvin A. Pomerantz Title: Chairman and Chief Executive Officer /s/ Marvin A. Pomerantz ------------------------------------ Marvin A. Pomerantz /s/ Warren J. Hayford ------------------------------------ Warren J. Hayford 11 /s/ Daniel P. Casey ----------------------------------- Daniel P. Casey /s/ Mary Sue Coleman ------------------------------------ Mary Sue Coleman /s/ Harve A. Ferrill ------------------------------------- Harve A. Ferrill /s/ John E. Goodenow ------------------------------------- John E. Goodenow /s/ David B. Hawkins ------------------------------------- David B. Hawkins /s/ Charles S. Johnson ------------------------------------- Charles S. Johnson /s/ Jerry W. Kolb ------------------------------------- Jerry W. Kolb /s/ Ralph L. MacDonald, Jr. ------------------------------------- Ralph L. MacDonald, Jr. 12 /s/ Michael J. Keough ------------------------------------- Michael J. Keough /s/ Lawrence G. Rogna ------------------------------------- Lawrence G. Rogna /s/ Jeffrey B. Park ------------------------------------- Jeffrey B. Park 13 SCHEDULE 1(a) OWNERSHIP OF EQUITY SECURITIES OF THE COMPANY
SHARES UNDER SHARES OF CLASS A SHARES OF UNEXERCISED SHAREHOLDER COMMON STOCK RESTRICTED STOCK OPTION GRANTS ----------- --------------- ---------------- ------------- Mid-America Group, Ltd. 4,589,942 Marvin A. Pomerantz 40,000 Warren J. Hayford 883,186 28,000 Daniel P. Casey 77,250 270,000 180,000 Mary Sue Coleman 3,008 28,000 Harve A. Ferrill 25,000 28,000 John E. Goodenow 21,500 28,000 David B. Hawkins 2,000 28,000 Charles S. Johnson 28,000 Jerry W. Kolb 10,000 21,000 Ralph L. MacDonald Jr. 40,000 28,000 Michael J. Keough 98,570 310,000 90,000 Lawrence G. Rogna 44,000 135,000 90,000 Jeffrey B. Park 41,024 82,000 60,000 --------- ------- --------- Totals 5,875,480 797,000 637,000
14 SCHEDULE 1(g) OWNERSHIP OF DEBT SECURITIES OF THE COMPANY John E. Goodenow owns $30,000 principal amount of the Company's 9-3/4% Senior Notes due 2007.
EX-99.(D)(3) 14 d90566ex99-d3.txt STOCK OPTION AGREEMENT DATED 9/27/01 1 EXECUTION COPY STOCK OPTION AGREEMENT THIS STOCK OPTION AGREEMENT (this "Agreement"), dated as of September 27, 2001, is by and between Temple-Inland Inc., a Delaware corporation ("Parent"), and Gaylord Container Corporation, a Delaware corporation (the "Company"). WITNESSETH WHEREAS, Parent, Temple-Inland Acquisition Corporation, a Delaware corporation and an indirect wholly-owned subsidiary of Parent ("Merger Subsidiary"), and the Company, concurrently with the execution and delivery of this Agreement, will enter into an Agreement and Plan of Merger, dated as of the date hereof (the "Merger Agreement"), providing for, among other things, the acquisition of the Company by Parent by means of a cash tender offer for all of the outstanding shares of Company Common Stock (as defined in Section 1.1) and for the subsequent merger of Merger Subsidiary with and into the Company (the "Merger") upon the terms and subject to the conditions set forth in the Merger Agreement; and WHEREAS, as a condition to the willingness of Parent and Merger Subsidiary to enter into the Merger Agreement, Parent and Merger Subsidiary have required that the Company agree, and in order to induce Parent and Merger Subsidiary to enter into the Merger Agreement the Company has agreed, to grant Parent the Option (as hereinafter defined) upon the terms and subject to the conditions of this Agreement. NOW THEREFORE, in consideration of the execution and delivery by Parent and Merger Subsidiary of the Merger Agreement and the foregoing and the mutual representations, warranties, covenants and agreements contained herein, and intending to be legally bound hereby, Parent and the Company hereby agree as follows: ARTICLE I THE OPTION Section 1.1 Grant of Option. The Company hereby grants to Parent 2 an irrevocable option (the "Option") to purchase up to such number of newly-issued shares (the "Shares") of Class A Common Stock, par value $.0001 per share, of the Company (the "Company Common Stock") as is equal to 19.9% of the Shares outstanding on the date of exercise of the Option at a purchase price per share of $1.80 (the "Exercise Price"), in the manner set forth in Sections 1.2 and 1.3 of this Agreement. The number of Shares that may be received upon the exercise of the Option and the Exercise Price are subject to adjustment as herein set forth. This Agreement shall terminate, and the Option hereby granted shall expire, on the earliest of (i) the Effective Time (as defined in the Merger Agreement) and (ii) the termination of the Merger Agreement. Section 1.2 Exercise Of Option. At any time or from time to time prior to the termination of the Option in accordance with the terms of this Agreement, Parent (or its designee) may exercise the Option, in whole or in part, if on or after the date hereof, Merger Subsidiary accepts for payment pursuant to the Offer (as defined in the Merger Agreement) shares of Company Common Stock constituting more than 66 2/3% but less than 90% of the shares of Company Common Stock then outstanding on a fully diluted basis and the exercise of the Option would result in Merger Subsidiary and its affiliates holding shares of Company Common Stock representing 90% or more of the shares of Company Common Stock then outstanding on a fully diluted basis. In the event that Parent wishes to exercise all or any part of the Option, Parent shall give written notice (the "Option Notice," with the date of the Option Notice being hereinafter called the "Notice Date") to the Company, specifying the number of Shares it will purchase and a place and date (not earlier than three nor later than 20 business days from the Notice Date) for closing such purchase (a "Closing"). Parent's obligation to purchase Shares, and the Company's obligation to issue Shares, upon any exercise of the option is subject (at its election) to the conditions that (i) no preliminary or permanent injunction or other order against the purchase, issuance or delivery of the Shares issued by any Federal, state or foreign court of competent jurisdiction shall be in effect (and no action or proceeding shall have been commenced or threatened for purposes of obtaining such an injunction or order) and (ii) any applicable waiting period under the HSR Act (as defined in the Merger Agreement) and any foreign antitrust or competition laws and regulations shall have expired and (iii) there shall have been no material breach of the representations, warranties, covenants or agreements of the other party contained in this Agreement or the Merger Agreement; provided, however, that any failure by Parent to purchase Shares, or any failure by the Company to issue Shares, upon exercise of the Option at any Closing as a result of the nonsatisfaction of any of such conditions shall not affect or prejudice Parent's right 2 3 to purchase such Shares upon the subsequent satisfaction of such conditions. Section 1.3 Purchase of Shares. At any Closing, (i) the Company will deliver to Parent the certificate or certificates representing the number of Shares being purchased in proper form for transfer upon exercise of the Option in the denominations designated by Parent in the Option Notice, and, if the Option has been exercised in part, a new Option evidencing the rights of Parent to purchase the balance of the Shares subject thereto, and (ii) Parent shall pay the aggregate purchase price for the Shares to be purchased by wire transfer to a bank account designated in writing by the Company in an amount equal to the Exercise Price times the number of shares to be purchased. Section 1.4 Adjustments Upon Share Issuances, Changes in Capitalization, etc. (a) In the event of any change in Company Common Stock or in the number of outstanding shares of Company Common Stock by reason of a stock dividend, split-up, recapitalization, combination, exchange of shares or similar transaction or any other change in the corporate or capital structure of the Company (including, without limitation, the declaration or payment of a dividend of cash, securities or other property), the type and number of the Shares to be issued by the Company upon exercise of the Option shall be adjusted appropriately, and proper provision shall be made in the agreements governing such transaction, so that Parent shall receive upon exercise of the Option the number and class of shares or other securities or property that Parent would have received with respect to the Company Common Stock if the Option had been exercised immediately prior to such event or the record date therefor, as applicable, and such Company Common Stock had elected to the fullest extent it would have been permitted to elect, to receive such securities, cash or other property. (b) In the event that the Company shall enter into an agreement (i) to consolidate with or merge into any person, other than Parent or one of its subsidiaries, and shall not be the continuing or surviving corporation of such consolidation or merger, (ii) to permit any person, other than Parent or one of its subsidiaries, to merge into the Company and the Company shall be the continuing or surviving corporation, but, in connection with such merger, the then outstanding shares of Company Common Stock shall be changed into or exchanged for stock or other securities of the Company or any other person or cash or any other property, or the then outstanding shares of Company Common Stock shall after such merger represent less than 50% of the outstanding shares and share equivalents of the surviving corporation or (iii) to sell or otherwise transfer all or substantially all of its assets to any person, other than Parent or one of its subsidiaries, then, and in each 3 4 such case, proper provision shall be made in the agreements governing such transaction so that Parent shall receive upon exercise of the Option the number and class of shares or other securities or property that Parent would have received with respect to Company Common Stock if the Option had been exercised immediately prior to such transaction or the record date therefor, as applicable, and such Company Common Stock had elected to the fullest extent it would have been permitted to elect, to receive such securities, cash or other property. (c) The rights of Parent under this Section 1.4 shall be in addition to, and shall in no way limit, its rights against the Company for any breach of the Merger Agreement. (d) The provisions of this Agreement shall apply with appropriate adjustments to any securities for which the Option becomes exercisable pursuant to this Section 1.4. ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to Parent as follows: Section 2.1 Authority Relative to this Agreement. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. The Company has all requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by the Board of Directors of the Company, and no other corporate proceeding on the part of the Company is necessary to authorize this Agreement or for the Company to consummate such transactions. This Agreement has been duly and validly executed and delivered by the Company and, assuming this Agreement constitutes the legal, valid and binding obligation of Parent, constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and similar laws, now or hereafter in effect, relating to or affecting creditors' rights and remedies and to general principles of equity. Section 2.2 No Conflict; Required Filings and Consents. The 4 5 execution and delivery of this Agreement by the Company do not, and the consummation of the transactions contemplated by and compliance with the provisions of this Agreement will not, (i) conflict with or violate the Certificate of Incorporation or By-laws of the Company, in each case as amended to the date of this Agreement, (ii) conflict with or violate any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to the Company or by which the Company is bound or affected, (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in the creation of a lien or encumbrance of any kind on any of the Shares pursuant to, any agreement, contract, indenture, notice or instrument to which the Company is a party or by which the Company is bound or affected, or (iv) except for applicable requirements, if any, of the HSR Act, the Exchange Act and the Securities Act of 1933, as amended (the "Securities Act"), require any filing by the Company with, or any permit, authorization, consent or approval of, any governmental or regulatory authority, domestic or foreign. Section 2.3 Option Shares. The Company has taken all necessary corporate action to authorize and reserve for issuance such number of Shares as may be issuable upon exercise of the Option, and the Shares, when issued and delivered by the Company to Parent upon exercise of the Option, will be duly authorized, validly issued, fully paid and nonassessable shares of Company Common Stock, and will be free and clear of any preemptive rights, security interests, liens, claims, pledges, charges or encumbrances of any kind. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT Parent hereby represents and warrants to the Company as follows: Section 3.1 Authority Relative to this Agreement. Parent is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Parent has all requisite power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution and delivery of this Agreement by Parent and the consummation by Parent of the transactions contemplated hereby have been duly authorized by the Board of Directors of Parent, and no other 5 6 corporate proceeding on the part of Parent is necessary to authorize this Agreement or for Parent to consummate such transactions. This Agreement has been duly executed and delivered by Parent and, assuming this Agreement constitutes the legal, valid and binding obligation of the Company, constitutes a legal, valid and binding obligation of Parent, enforceable against Parent in accordance with its terms, subject to bankruptcy, insolvency, reorganization, moratorium and similar laws, now or hereafter in effect, relating to or affecting creditors' rights and remedies and to general principles of equity. Section 3.2 No Conflict, Required Filing and Consents. The execution and delivery of this Agreement by Parent do not, and the consummation of the transactions contemplated by and compliance with the provisions of this Agreement will not, (i) conflict with or violate the Certificate of Incorporation or By-laws of Parent, in each case as amended to the date of this Agreement, (ii) conflict with or violate any judgment, order, decree, statute, law, ordinance, rule or regulation applicable to Parent or by which Parent is bound or affected, (iii) result in any breach of or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, contract, indenture, note or instrument to which Parent is a party or by which it is bound or affected or (iv) except for applicable requirements, if any, of the HSR Act, the Exchange Act, and the Securities Act, require any filing by Parent with, or any permit, authorization, consent or approval of, any governmental or regulatory authority, domestic or foreign, except in the case of each of the foregoing clauses (i) through (iv) for any such conflicts, violations, breaches, defaults, failures to file or obtain the consent or approval of, or other occurrences that would not cause or create a material risk of non-performance or delayed performance by Parent of its obligations under this Agreement. Section 3.3 Investment Intent. The purchase of Shares pursuant to this Agreement is for the account of Parent for the purpose of investment and not with a view to or for sale in connection with any distribution thereof within the meaning of the Securities Act and the rules and regulations promulgated thereunder. ARTICLE IV ADDITIONAL AGREEMENTS Section 4.1 Transfer of Shares; Restrictive Legend. Parent agrees to the placement on the certificate(s) representing the Shares of the following legend: 6 7 THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. It is understood and agreed that the reference to restrictions arising under the Securities Act in the above legend will be removed by delivery of substitute certificate(s) without such reference if such Shares have been sold in compliance with the registration and prospectus delivery requirements of the Securities Act or Parent has delivered to the Company a copy of a letter from the staff of the Securities and Exchange Commission, or an opinion of counsel in form and substance reasonably satisfactory to the Company and its counsel, to the effect that such legend is not required for purposes of the Securities Act. Section 4.2 Reasonable Best Efforts. Subject to the terms and conditions of this Agreement, Parent and the Company shall each use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate and make effective the transactions contemplated by this Agreement. Each party shall promptly consult with the other and provide any necessary information and material with respect to all filings made by such party with any governmental or regulatory authority in connection with this Agreement or the transactions contemplated hereby. Section 4.3 Further Assurances. The Company shall perform such further acts and execute such further documents and instruments as may reasonably be required to vest in Parent the power to carry out the provisions of this Agreement. If Parent shall exercise the Option, or any portion thereof, in accordance with the terms of this Agreement, the Company shall, without additional consideration, execute and deliver all such further documents and instruments and take all such further action as Parent may reasonably request for the purpose of effectively carrying out the transactions contemplated by this Agreement. Section 4.4 Survival. All of the representations, warranties and covenants contained herein shall survive a Closing and shall be deemed to have been made as of the date hereof and as of the date of each Closing. 7 8 ARTICLE V MISCELLANEOUS Section 5.1 Amendment. This Agreement may not be amended except by an instrument in writing signed by the parties hereto and specifically referencing this Agreement. Section 5.2 Notices. All notices, requests 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) or by telecopy (with copies by overnight courier) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to Parent, to Temple-Inland Inc. 303 South Temple Drive Diboll, TX 75941 Attention: M. Richard Warner, Esq. Fax: 936-829-3333 with a copy to (which shall not constitute notice): Skadden, Arps, Slate, Meagher & Flom LLP 1440 New York Avenue, N.W. Washington, DC 20005 Attention: Stephen W. Hamilton, Esq. Fax: 202-393-5760 (b) if to the Company, to Gaylord Container Corporation 500 Lake Cook Road, Suite 400 Deerfield, IL 60015 Attention: Daniel P. Casey Fax: 847-405-5628 8 9 with a copy to (which shall not constitute notice): Kirkland & Ellis 200 East Randolph Drive Chicago, IL 60601 Attention: William S. Kirsch, P.C. John A. Schoenfeld Fax: 312-861-2200 Section 5.3 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. Section 5.4 Entire Agreement; No Third-Party Beneficiaries. This Agreement and the Merger Agreement (including the documents and the instruments referred to herein and therein): (a) constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof, and (b) are not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. Section 5.5 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without giving effect to the principles of conflicts of law thereof. Section 5.6 Assignment. 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; any instrument purporting to make such assignment shall be void. Notwithstanding the foregoing, the rights and obligations of Parent hereunder may, upon written notice to the Company prior to or promptly following such action, be assigned by Parent to any of its corporate affiliates so long as such party remains an affiliate of Parent, but no such transfer shall relieve Parent of its obligations hereunder if such transferee does not perform such obligations. Subject to the first sentence of this Section 5.6, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns. Section 5.7 Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is 9 10 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 of the United States located in the State of Delaware or in Delaware state court, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (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, (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 (c) agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court other than a Federal or state court sitting in the State of Delaware. Section 5.8 Severability. Any term or provision of this Agreement that is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction. If the final judgment of a court of competent jurisdiction or other authority declares that any term or provision hereof is invalid, void or unenforceable, the parties agree that the court making such determination shall have the power to reduce the scope, duration, area or applicability of the term or provision, to delete specific words or phrases, or to replace any invalid, void or unenforceable term or provision with a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision. [Signature pages follow] 10 11 IN WITNESS WHEREOF, each of Parent and the Company have caused this Agreement to be executed on its behalf by its officers thereunto duly authorized, all as of the date first above written. TEMPLE-INLAND INC. By: /s/ M. Richard Warner --------------------------------- Name: M. Richard Warner Title: Vice President and Chief Administrative Officer GAYLORD CONTAINER CORPORATION By: /s/ Daniel P. Casey --------------------------------- Name: Daniel P. Casey Title: Executive Vice President 11 EX-99.(D)(4) 15 d90566ex99-d4.txt CONFIDENTIALITY AGREEMENT DATED 1/19/00 1 Daniel P. Casey Gaylord Container Corporation Executive Vice President 500 Lake Cook Road Suite 400 Deerfield, Illinois 60015-4925 (847) 405-5612 January 19, 2000 Temple-Inland Inc. 1300 South MoPac Austin, Texas 78746 Attention: Mr. Randall Levy Chief Financial Officer Ladies and Gentlemen: In connection with your possible interest in a transaction with Gaylord Container Corporation (the "Company"), we propose to furnish you with certain information related to the Company (herein referred to as the "Confidential Information"). Confidential Information includes not only written information but also information transferred orally, visually, electronically or by any other means. The fact that such information has been delivered to you, that such a transaction is under consideration by the Company, that discussions or negotiations have occurred or are occurring regarding a possible transaction involving the Company and you, and the status of any such discussions or negotiations, are considered Confidential Information for purposes of this Agreement. In consideration of our furnishing you with the Confidential Information, and as a condition to such disclosure, you agree as follows: 1. The Confidential Information will be used by you solely for the purpose of your evaluation of the desirability of your entering into a transaction with the Company, and for no other purpose. 2. You shall keep all Confidential Information secret and confidential and shall not, without the prior written consent of the Company, discuss with or disclose it to anyone except to a limited group of your own employees, directors, officers, agents and professional service companies representing you as outside advisors ("Representatives") who are actually engaged in, and need to know such Confidential Information to perform, the evaluation referred to above, each of whom must be advised of the confidential nature of the Confidential Information and of the terms of this Agreement and must agree to abide by such terms. You shall be responsible for any breach of this Agreement by any of your Representatives. 3. Upon any termination of your evaluation of pursuing a transaction with the Company or upon notice from the Company to you (i) you will return to the Company the Confidential Information which is in tangible form, including any copies which you may have made, and you will destroy all abstracts, summaries thereof or references thereto in your documents, and certify to us that you have done so, and (ii) neither you nor your Representatives will use any of the Confidential Information with respect to, or in furtherance of, your business, any of their respective businesses, or in the business of anyone else, whether or not in competition with the Company, or for any other purpose whatsoever. 2 4. Confidential Information includes all analyses, compilations, forecasts, studies or other documents prepared by you or your Representatives in connection with your evaluation of pursuing a transaction with the Company. Confidential Information does not include any information which was publicly available prior to your receipt of such information or thereafter became publicly available (other than as a result of disclosure by you or any of your Representatives). Information shall be deemed "publicly available" if it becomes a matter of public knowledge or is contained in materials available to the public or is obtained from any source other than the Company (or its directors, officers, employees, agents or outside advisors), provided that such source is not to your knowledge prohibited from disclosing such information by a legal, contractual or fiduciary obligation to the Company and did not obtain the information from an entity or person prohibited from disclosing such information by a legal, contractual or fiduciary obligation to the Company. 5. You understand that we have endeavored to include in the Confidential Information those materials which we believe to be reliable and relevant for the purpose of your evaluation, but you acknowledge that neither the Company nor any of its directors, officers, employees, agents or outside advisors makes any representation or warranty as to the accuracy or completeness of the Confidential Information and you agree that such persons shall have no liability to you or any of your Representatives resulting from any use of the Confidential Information. You understand that the Confidential Information is not being furnished for use in an offer or sale of securities of the Company and is not designed to satisfy the requirements of federal or state securities laws in connection with any offer or sale of such securities to you. 6. In the event that you or any of your Representatives is requested in any proceeding to disclose any of the Confidential Information, you will provide the Company with prompt prior notice so that the Company may seek a protective order or other appropriate remedy and/or waive compliance with the provisions of this Agreement. In the event that the Company is unable to obtain such protective order or other appropriate remedy, you will furnish only that portion of the Confidential Information which you are advised by a written opinion of counsel is legally required, you will give the Company written notice of the information to be disclosed as far in advance as practicable, and you will exercise your best efforts to obtain a protective order or other reliable assurance that confidential treatment will be accorded the Confidential Information so disclosed. 7. Without the prior written consent of the Company, you will not, and will not encourage or assist others to, for a period of two years (i) acquire or offer, seek, propose or agree to acquire, directly or indirectly, by purchase or otherwise, any voting securities or assets or direct or indirect rights or options to acquire any voting securities or assets of the Company, (ii) propose or disclose an intent to propose any form of business combination, acquisition, restructuring, recapitalization or other similar transaction relating to the Company, (iii) make , or in any way participate, directly or indirectly, in any "solicitation" of any "proxy" to vote (as such terms are used in the proxy rules of the Securities and Exchange Commission) or seek to advise or influence any person or entity with respect to 3 the voting of any voting securities of the Company, (iv) form, join or in any way participate, directly or indirectly, in a group within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, (a "Group") with respect to any voting securities of the Company, (v) enter into any discussions, negotiations, arrangements or understandings with any third party with respect to any of the foregoing, (vi) disclose any intention, plan or arrangement inconsistent with the foregoing, (vii) otherwise act, alone or in concert with others, directly or indirectly, to seek control of the management, board of directors, or policies of the Company, (viii) request the Company, directly or indirectly, to amend or waive any provisions of this paragraph. Notwithstanding the foregoing, provisions (ii) through (viii) of this paragraph shall terminate upon the earlier of (a) the execution by the Company of any agreement providing for the sale of all or substantially all of the company's assets or the combination of the Company with or into any other entity other than a combination immediately following which the shareholders of the Company immediately prior to the combination hold, immediately after the combination, at least 51% of the voting securities of the post-combination entity or (b) any Group shall have commenced a tender or exchange offer as a result of which such person or group intends to acquire 51% or more of the capital stock of the Company entitled to vote in the election of directors or shall have acquired or announced an intention to acquire such a controlling interest. 8. You agree that for a period of two years, you will not, directly or indirectly, solicit for employment or hire any employee of the Company or any of the subsidiaries with whom you have had contact or who became known to you in connection with your evaluation of a possible transaction involving the Company; provided that the foregoing provision will not prevent you from employing any such person who contacts you on his or her own initiative without any direct or indirect solicitation by, or encouragement (not including a general solicitation of employment not specifically directed towards employees of the Company) from, you. 9. Without impairing any other provision hereof, you will promptly advise the Company of any prohibited disclosure or other breach of this Agreement. 10. You understand and agree that money damages would not be a sufficient remedy for any breach of this Agreement by you or your Representatives, and that the Company, its agents and representatives shall be entitled to specific performance and/or injunctive relief as a remedy for any such breach. Such remedy shall not be deemed to be the exclusive remedy for any such breach of this Agreement but shall be in addition to all other remedies available at law, or in equity. You further agree that no failure or delay by the Company, its directors, officers, employees, agents or outside advisors or representatives in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power or privilege under this Agreement. 4 11. Nothing in this Agreement shall impose any obligation upon you or us to consummate a transaction or to enter into any discussion or negotiations with respect thereto. 12. This Agreement shall be governed by the laws of the State of New York. If you are in agreement with the foregoing, please sign and return the enclosed copy of this letter which will constitute our agreement with respect to the subject matter of this letter as of the date first above written. Very truly yours, GAYLORD CONTAINER CORPORATION By: /s/ Daniel P. Casey ------------------------------- Name: Daniel P. Casey Title: Executive Vice President AGREED AND ACCEPTED TO: TEMPLE-INLAND INC. By: /s/ Randall D. Levy ------------------------------ Name: Randall D. Levy Title: Chief Financial Officer