-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D79SLM9fLmpPkAMvjBrBf0XvetTSsJWbJjXipqKNQlsgccVjHbsVdSxEGuIq7Xwq GSWAE9f8n51jbvSYxqv2Ig== 0000950124-98-001603.txt : 19980327 0000950124-98-001603.hdr.sgml : 19980327 ACCESSION NUMBER: 0000950124-98-001603 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 19980326 SROS: NONE GROUP MEMBERS: IVEX PACKAGING CORP /DE/ GROUP MEMBERS: IVEX PACKAGING CORPORATION GROUP MEMBERS: PACKAGE ACQUISITION, INC. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: ULTRA PAC INC CENTRAL INDEX KEY: 0000813134 STANDARD INDUSTRIAL CLASSIFICATION: CONVERTED PAPER & PAPERBOARD PRODS (NO CONTAINERS/BOXES) [2670] IRS NUMBER: 411581031 STATE OF INCORPORATION: MN FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: SEC FILE NUMBER: 005-41569 FILM NUMBER: 98574766 BUSINESS ADDRESS: STREET 1: 21925 INDUSTRIAL BLVD CITY: ROGERS STATE: MN ZIP: 55374 BUSINESS PHONE: 6124288340 MAIL ADDRESS: STREET 1: 21925 INDUSTRIAL BLVD CITY: ROGERS STATE: MN ZIP: 55374 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: IVEX PACKAGING CORP /DE/ CENTRAL INDEX KEY: 0000900367 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS, FOIL & COATED PAPER BAGS [2673] IRS NUMBER: 760171625 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: 100 TRI STATE DR STREET 2: SUITE 200 CITY: LINCOLNSHIRE STATE: IL ZIP: 60069 BUSINESS PHONE: 7089459100 MAIL ADDRESS: STREET 1: 100 TRI STATE DRIVE STREET 2: SUITE 200 CITY: LINCOLNSHIRE STATE: IL ZIP: 60069 FORMER COMPANY: FORMER CONFORMED NAME: IVEX HOLDINGS CORP DATE OF NAME CHANGE: 19940920 SC 14D1 1 SCHEDULE 14D-1 AND 13D 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ SCHEDULE 14D-1 TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 AND SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 ------------------------ ULTRA PAC, INC. (NAME OF SUBJECT COMPANY) PACKAGE ACQUISITION, INC. IVEX PACKAGING CORPORATION (BIDDERS) ------------------------ COMMON STOCK, NO PAR VALUE PER SHARE (TITLE OF CLASS OF SECURITIES) ------------------------ 903886 (CUSIP NUMBER OF CLASS OF SECURITIES) ------------------------ G. DOUGLAS PATTERSON VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY IVEX PACKAGING CORPORATION 100 TRI-STATE DRIVE LINCOLNSHIRE, ILLINOIS 60069 (847) 945-9100 (NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDER) ------------------------ COPY TO: WILLIAM R. KUNKEL, ESQ. SKADDEN, ARPS, SLATE, MEAGHER & FLOM (ILLINOIS) 333 WEST WACKER DRIVE CHICAGO, ILLINOIS 60606 (312) 407-0700 MARCH 23, 1998 (DATE OF EVENT WHICH REQUIRES FILING OF THIS STATEMENT) CALCULATION OF FILING FEE ================================================================================
TRANSACTION VALUATION* AMOUNT OF FILING FEE ---------------------- -------------------- $66,971,260 $13,395
* Estimated for purposes of calculating the filing fee only. This amount assumes the purchase of 3,893,791 shares of Ultra Pac, Inc. Common Stock, including the associated preferred stock purchase rights ("Shares"), which are outstanding at $15.50 per Share, and 637,524 Shares which are subject to outstanding options and warrants at $15.50 per Share less the exercise price of such options and warrants. The amount of the filing fee, calculated in accordance with Rule 0-11(d) under the Securities Exchange Act of 1934, as amended, equals 1/50 of one percent of the value of the Shares to be purchased. [ ] Check box if any part of the fee is offset as provided by Rule 0-11 (a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. AMOUNT PREVIOUSLY PAID: NOT APPLICABLE. FORM OR REGISTRATION NO.: NOT APPLICABLE. FILING PARTY: NOT APPLICABLE. DATE FILED: NOT APPLICABLE. ================================================================================ PAGE 1 OF 9 PAGES EXHIBIT INDEX ON PAGE 9 2 SCHEDULE 14D-1 AND 13D
- ------------------------------ ------------------------------ CUSIP NO. 903886 PAGE 2 OF 9 PAGES - ------------------------------ ------------------------------
- ----------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS: IVEX PACKAGING CORPORATION I.R.S. IDENTIFICATION NUMBER: 76-0171625 - ----------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A) [ ] (B) [ ] - ----------------------------------------------------------------------------------- 3 SEC USE ONLY - ----------------------------------------------------------------------------------- 4 SOURCE OF FUNDS: BK; AF - ----------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) or 2(E): [ ] - ----------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION: STATE OF DELAWARE - ----------------------------------------------------------------------------------- 7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 509,550* - ----------------------------------------------------------------------------------- 8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES: [ ] - ----------------------------------------------------------------------------------- 9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7): 13.09%* - ----------------------------------------------------------------------------------- 10 TYPE OF REPORTING PERSON: HC AND CO - -----------------------------------------------------------------------------------
- --------------- * On March 23, 1998, Ivex Packaging Corporation, a Delaware corporation ("Parent"), and Package Acquisition, Inc., a Minnesota corporation and an indirect wholly-owned subsidiary of Parent ("Purchaser"), entered into Tender and Option Agreements (the "Tender Agreements") with Calvin S. Krupa, President, Chief Executive Officer and Chairman of the Board of Ultra Pac, Inc. (the "Company"), and James A. Thole, Secretary of the Company (the "Executive Shareholders"), who own an aggregate of 509,550 shares, or approximately 13.09% of the shares outstanding on March 23, 1998, pursuant to which the Executive Shareholders agreed, among other things and upon the terms and conditions set forth therein, to tender the shares owned by them in the Offer (as defined herein), to grant an option on such shares at the Offer Price (as defined herein) to Purchaser, to vote such shares in the manner specified in the Tender Agreements with respect to certain matters and to appoint Parent as the Executive Shareholders' proxy to vote such shares in certain circumstances. The Tender Agreements are described more fully in Section 11 of the Offer to Purchase dated March 26, 1998. 3 SCHEDULE 14D-1 AND 13D
- ------------------------------ ------------------------------ CUSIP NO. 903886 PAGE 3 OF 9 PAGES - ------------------------------ ------------------------------
- ----------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON: PACKAGE ACQUISITION, INC. S.S. OR I.R.S. IDENTIFICATION NUMBER: APPLIED FOR. - ----------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (A) [ ] (B) [ ] - ----------------------------------------------------------------------------------- 3 SEC USE ONLY - ----------------------------------------------------------------------------------- 4 SOURCE OF FUNDS: AF - ----------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(E) or 2(F): [ ] - ----------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION: STATE OF MINNESOTA - ----------------------------------------------------------------------------------- 7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 509,550* - ----------------------------------------------------------------------------------- 8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES: [ ] - ----------------------------------------------------------------------------------- 9 PERCENT OF CLASS REPRESENTED TO AMOUNT IN ROW (7): 13.09%* - ----------------------------------------------------------------------------------- 10 TYPE OF REPORTING PERSON: CO - -----------------------------------------------------------------------------------
- --------------- * The footnote on page 2 is incorporated by reference herein. 4 SCHEDULE 14D-1 AND 13D - ------------------------------ ------------------------------ CUSIP NO. 903886 PAGE 4 OF 9 PAGES - ------------------------------ ------------------------------
This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to the offer by Package Acquisition, Inc., a Minnesota corporation (the "Purchaser") and an indirect wholly-owned subsidiary of Ivex Packaging Corporation, a Delaware corporation ("Parent"), to purchase all outstanding shares of Common Stock, no par value per share (the "Common Stock"), including the associated preferred share purchase rights (the "Rights", and together with the Common Stock, the "Shares"), of Ultra Pac, Inc., a Minnesota corporation (the "Company"), at $15.50 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated March 26, 1998 (the "Offer to Purchase"), a copy of which is attached hereto as Exhibit(a)(1), and in the related Letter of Transmittal, a copy of which is attached hereto as Exhibit(a)(2) (which together constitute the "Offer"). This Tender Offer Statement on Schedule 14D-1 also constitutes a Statement on Schedule 13D with respect to the Tender Agreements as described above. The item numbers and responses thereto below are in accordance with the requirements of Schedule 14D-1. ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is Ultra Pac, Inc. and the address of its principal executive offices is 21925 Industrial Boulevard, Rogers, Minnesota 55374. (b) The class of securities to which this Statement relates is the Common Stock, no par value per share (including the associated preferred share purchase rights), of the Company. The information set forth in the "Introduction" and Section 1, "Terms of the Offer" of the Offer to Purchase is incorporated herein by reference. (c) The information set forth in Section 6, "Price Range of the Shares; Dividends on the Shares" of the Offer to Purchase is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. (a)-(d), (g) The information set forth in the "Introduction" and Section 9, "Certain Information Concerning Parent and the Purchaser" of the Offer to Purchase is incorporated herein by reference. The name, business address, present principal occupation or employment, the material occupations, positions, offices or employments for the past five years and citizenship of each director and executive officer of the Purchaser and Parent and the name, principal business and address of any corporation or other organization in which such occupations, positions, offices and employments are or were carried on are set forth in Schedule I of the Offer to Purchase and incorporated herein by reference. (e) and (f) During the last five years, none of the Purchaser or Parent or, to the best of the Purchaser's knowledge, any of the directors or executive officers of the Purchaser or Parent has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which any such person was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a)(1) The information set forth in Section 9, "Certain Information Concerning Parent and the Purchaser" of the Offer to Purchase is incorporated herein by reference. Except as described therein, neither the Purchaser nor Parent, nor to the best of the knowledge of the Purchaser and Parent, any of the persons listed in Schedule I of the Offer to Purchase, has entered into any transaction with the Company, or any of the Company's affiliates which are corporations, since the commencement of the Company's third full fiscal year preceding the date of this Statement, the aggregate amount of which was equal to or greater than one percent of the consolidated revenues of the Company for (i) the fiscal year in which such transaction occurred, or (ii) the portion of the current fiscal year which has occurred if the transaction occurred in such year. 5 SCHEDULE 14D-1 AND 13D - ------------------------------ ------------------------------ CUSIP NO. 903886 PAGE 5 OF 9 PAGES - ------------------------------ ------------------------------
(a)(2) The information set forth in Section 9, "Certain Information Concerning Parent and the Purchaser" of the Offer to Purchase is incorporated herein by reference. Except as described therein, neither the Purchaser nor Parent, nor to the best of the knowledge of the Purchaser and Parent, any of the persons listed in Schedule I of the Offer to Purchase, has entered into any transaction since the commencement of the Company's third full fiscal year preceding the date of this Statement, with the executive officers, directors or affiliates of the Company which are not corporations, in which the aggregate amount involved in such transaction or in a series of similar transactions, including all periodic installments in the case of any lease or other agreement providing for periodic payments or installments, exceeded $40,000. (b) The information set forth in the "Introduction," Section 9, "Certain Information Concerning Parent and the Purchaser," Section 11, "Background of the Offer; the Merger Agreement and Certain Other Agreements" and Section 12, "Purpose of the Offer and the Merger; Plans for the Company; Other Matters" of the Offer to Purchase is incorporated herein by reference. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a)-(b) The information set forth in Section 10, "Source and Amount of Funds" and Section 12, "Purpose of the Offer and the Merger; Plans for the Company; Other Matters" of the Offer to Purchase is incorporated herein by reference. (c) Not applicable. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. (a)-(e) The information set forth in the "Introduction," Section 11, "Background of the Offer; the Merger Agreement and Certain Other Agreements," and Section 12, "Purpose of the Offer and the Merger; Plans for the Company; Other Matters" of the Offer to Purchase is incorporated herein by reference. (f) and (g) The information set forth in Section 7, "Effect of the Offer on the Market for Shares; Stock Quotation; Exchange Act Registration; Margin Regulations" of the Offer to Purchase is incorporated herein by reference. ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a)-(b) The information set forth in the "Introduction," Section 9, "Certain Information Concerning Parent and the Purchaser," Section 11, "Background of the Offer; the Merger Agreement and Certain Other Agreements," and Section 12, "Purpose of the Offer and the Merger; Plans for the Company; Other Matters" of the Offer to Purchase is incorporated herein by reference. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The information set forth in the "Introduction," Section 10, "Source and Amount of Funds," Section 11, "Background of the Offer; the Merger Agreement and Certain Other Agreements," Section 12, "Purpose of the Offer and the Merger; Plans for the Company; Other Matters," Section 13, "Dividends and Distributions" and Section 16, "Fees and Expenses" of the Offer to Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in the "Introduction" and in Section 16, "Fees and Expenses" of the Offer to Purchase is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. The information set forth in Section 9, "Certain Information Concerning Parent and the Purchaser" of the Offer to Purchase is incorporated herein by reference. 6 SCHEDULE 14D-1 AND 13D - ------------------------------ ------------------------------ CUSIP NO. 903886 PAGE 6 OF 9 PAGES - ------------------------------ ------------------------------
ITEM 10. ADDITIONAL INFORMATION. (a) The information set forth in the "Introduction," Section 11, "Background of the Offer; the Merger Agreement and Certain Other Agreements," and Section 12, "Purpose of the Offer and the Merger; Plans for the Company; Other Matters" of the Offer to Purchase is incorporated herein by reference. Except as described therein, there are no present or proposed material contracts, arrangements, understandings or relationships between the Purchaser or Parent, or to the best of the knowledge of the Purchaser and Parent, any of the persons listed in Schedule I of the Offer to Purchase, and the Company, or any of its executive officers, directors, controlling persons or subsidiaries. (b) and (c) The information set forth in Section 15, "Certain Legal Matters" of the Offer to Purchase is incorporated herein by reference. (d) The information set forth in Section 7, "Effect of the Offer on the Market for Shares; Stock Quotation; Exchange Act Registration; Margin Regulations," and Section 15, "Certain Legal Matters" of the Offer to Purchase is incorporated herein by reference. (e) None. (f) The information set forth in the Offer to Purchase and the Letter of Transmittal, to the extent not otherwise incorporated herein by reference, is incorporated herein by reference. ITEM 11. MATERIALS TO BE FILED AS EXHIBITS. (a)(1) Offer to Purchase, dated March 26, 1998. (a)(2) Letter of Transmittal with respect to the Shares. (a)(3) Letter, dated March 26, 1998, from Innisfree M&A Incorporated to Brokers, Dealers, Banks, Trust Companies and Other Nominees. (a)(4) Letter for use by Brokers, Dealers, Banks, Trust Companies and Nominees to their Clients. (a)(5) Notice of Guaranteed Delivery with respect to the Shares. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Press Release jointly issued by Parent and the Company, dated March 23, 1998. (a)(8) Form of Summary Advertisement, dated March 26, 1998. (b)(1) Amended and Restated Credit Agreement, dated as of October 2, 1997, by and among IPC, Inc., Parent, NationsBank, N.A. and Bankers Trust, as agents, and the guarantors and lenders identified on the signature pages thereto (incorporated herein by reference to Parent's Annual Report on Form 10-K for the year ended December 31, 1997). (b)(2) Form of Amended and Restated Pledge Agreement, dated as of October 2, 1997, among IPC, Inc., Parent, certain of IPC Inc.'s subsidiaries and NationsBank, N.A., and Bankers Trust Company, as agents (incorporated herein by reference to Parent's Annual Report on Form 10-K for the year ended December 31, 1997). (b)(3) Form of Amended and Restated Security Agreement, dated as of October 2, 1997, among IPC, Inc., Parent, and certain of IPC Inc.'s subsidiaries and NationsBank, N.A., and Bankers Trust Company, as agents (incorporated herein by reference to Parent's Annual Report on Form 10-K for the year ended December 31, 1997). (b)(4) Form of Amended and Restated Mortgage and Security Agreement (incorporated herein by reference to Parent's Annual Report on Form 10-K for the year ended December 31, 1997). (c)(1) Agreement and Plan of Merger, dated as of March 23, 1998, by and among Parent, the Purchaser and the Company. (c)(2) Form of Tender and Option Agreement, dated as of March 23, 1998, by and between Parent and certain shareholders of the Company. (c)(3) Confidentiality Agreement, dated February 27, 1998, by and between Parent and the Company. (d) None. (e) Not applicable. (f) None.
7 SCHEDULE 14D-1 AND 13D - ------------------------------ ------------------------------ CUSIP NO. 903886 PAGE 7 OF 9 PAGES - ------------------------------ ------------------------------
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. Package Acquisition, Inc. By: /s/ G. DOUGLAS PATTERSON ------------------------------------ Name: G. Douglas Patterson Title: Secretary Date: March 26, 1998 8 SCHEDULE 14D-1 AND 13D - ------------------------------ ------------------------------ CUSIP NO. 903886 PAGE 8 OF 9 PAGES - ------------------------------ ------------------------------
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. Ivex Packaging Corporation By: /s/ G. DOUGLAS PATTERSON ------------------------------------ Name: G. Douglas Patterson Title: Vice President Date: March 26, 1998 9 SCHEDULE 14D-1 AND 13D - ------------------------------ ------------------------------ CUSIP NO. 903886 PAGE 9 OF 9 PAGES - ------------------------------ ------------------------------
INDEX TO EXHIBITS
EXHIBIT NUMBER EXHIBIT - ------- ------- (a)(1) Offer to Purchase, dated March 26, 1998. (a)(2) Letter of Transmittal with respect to the Shares. (a)(3) Letter, dated March 26, 1998, from Innisfree M&A Incorporated to Brokers, Dealers, Banks, Trust Companies and Nominees. (a)(4) Letter for use by Brokers, Dealers, Banks, Trust Companies and Nominees to their Clients. (a)(5) Notice of Guaranteed Delivery with respect to the Shares. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Press Release jointly issued by Parent and the Company, dated March 23, 1998. (a)(8) Form of summary advertisement, dated March 26, 1998. (c)(1) Agreement and Plan of Merger, dated as of March 23, 1998, by and among Parent, the Purchaser and the Company. (c)(2) Form of Tender and Option Agreement, dated as of March 23, 1998, by and between Parent and certain shareholders of the Company. (c)(3) Confidentiality Agreement, dated February 27, 1998, by and between Parent and the Company.
EX-99.A.1 2 OFFER TO PURCHASE 1 EXHIBIT (a)(1) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS) OF ULTRA PAC, INC. BY PACKAGE ACQUISITION, INC. AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF IVEX PACKAGING CORPORATION AT $15.50 NET PER SHARE THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, APRIL 22, 1998, UNLESS THE OFFER IS EXTENDED. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE HAVING BEEN VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES WHICH, WHEN ADDED TO ANY SHARES ACQUIRED PURSUANT TO THE TENDER AGREEMENTS (AS DEFINED HEREIN), REPRESENTS AT LEAST A MAJORITY OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS. THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. SEE SECTION 14. IN CONNECTION WITH THE MERGER AGREEMENT, PARENT ENTERED INTO TENDER AGREEMENTS WITH CERTAIN SHAREHOLDERS OF THE COMPANY WHO COLLECTIVELY OWN APPROXIMATELY 13% OF THE OUTSTANDING SHARES, PURSUANT TO WHICH SUCH SHAREHOLDERS AGREED, AMONG OTHER THINGS, TO TENDER THEIR SHARES IN THE OFFER AND GRANT AN OPTION ON THEIR SHARES TO PARENT AT THE OFFER PRICE (AS DEFINED HEREIN). THE BOARD OF DIRECTORS OF THE COMPANY AND A DISINTERESTED COMMITTEE OF THE BOARD OF DIRECTORS (AS CONTEMPLATED BY SECTIONS 302A.673 AND 302A.675 OF THE MINNESOTA BUSINESS CORPORATION ACT) HAVE EACH UNANIMOUSLY APPROVED THE OFFER AND THE MERGER AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S SHAREHOLDERS, AND UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER ALL OF THEIR SHARES. ------------------------ IMPORTANT Any shareholder who desires to tender all or any portion of his Shares should either (1) complete and sign the Letter of Transmittal or a facsimile thereof in accordance with the instructions in the Letter of Transmittal, mail or deliver it and any other required documents to the Depositary and either deliver the certificates for such Shares to the Depositary along with the Letter of Transmittal or tender such Shares pursuant to the procedures for book-entry transfer set forth in Section 2 or (2) request his broker, dealer, commercial bank, trust company or other nominee to effect the transaction for him. Any shareholder whose Shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if he desires to tender such Shares. Any shareholder who desires to tender Shares and whose certificates representing such Shares are not immediately available, or who cannot comply with the procedures for book-entry transfer on a timely basis, may tender such Shares by following the procedures for guaranteed delivery set forth in Section 2. Questions and requests for assistance may be directed to the Information Agent at its address and telephone numbers set forth on the back cover of this Offer to Purchase. Requests for additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Information Agent, the Depositary, or to brokers, dealers, commercial banks or trust companies. A shareholder may also contact brokers, dealers, commercial banks or trust companies for assistance concerning the Offer. ------------------------ The Information Agent for the Offer is: [INNISFRE M&A INCORPORATED LOGO] March 26, 1998 2 TABLE OF CONTENTS
PAGE ---- INTRODUCTION................................................ 1 THE OFFER................................................... 3 1. Terms of the Offer................................. 3 2. Procedure for Tendering Shares..................... 5 3. Withdrawal Rights.................................. 7 4. Acceptance for Payment and Payment................. 8 5. Certain Federal Income Tax Consequences............ 9 6. Price Range of the Shares; Dividends on the Shares............................................... 9 7. Effect of the Offer on the Market for the Shares; Stock Quotation; Exchange Act Registration; Margin Regulations......................................... 10 8. Certain Information Concerning the Company......... 11 9. Certain Information Concerning Parent and the Purchaser............................................ 14 10. Source and Amount of Funds......................... 15 11. Background of the Offer; The Merger Agreement and Certain Other Agreements.............................. 16 12. Purpose of the Offer and the Merger; Plans for the Company; Other Matters................................ 27 13. Dividends and Distributions........................ 28 14. Conditions of the Offer............................ 28 15. Certain Legal Matters.............................. 30 16. Fees and Expenses.................................. 32 17. Miscellaneous...................................... 32 SCHEDULE I--Directors and Executive Officers of Parent and Purchaser................................................. I-1
3 To the Holders of Common Stock of ULTRA PAC, INC.: INTRODUCTION Package Acquisition, Inc., a Minnesota corporation (the "Purchaser") and an indirect wholly-owned subsidiary of Ivex Packaging Corporation, a Delaware corporation ("Parent"), hereby offers to purchase all outstanding shares of Common Stock, no par value per share (the "Common Stock"), including the associated preferred share purchase rights (the "Rights" and together with the Common Stock, the "Shares"), issued pursuant to the Rights Agreement (as defined below), of Ultra Pac, Inc., a Minnesota corporation (the "Company"), at $15.50 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements hereto or thereto, collectively constitute the "Offer"). Tendering shareholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer. The Purchaser will pay all fees and expenses of Bankers Trust Company, which is acting as the Depositary (the "Depositary"), and Innisfree M&A Incorporated, which is acting as the Information Agent (the "Information Agent"), incurred in connection with the Offer. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of March 23, 1998 (the "Merger Agreement"), by and among Parent, the Purchaser and the Company pursuant to which, as soon as practicable after the completion of the Offer and satisfaction or waiver, if permissible, of all conditions to the Merger (as defined below), the Purchaser will be merged with and into the Company (the "Merger") and the Company will become an indirect wholly-owned subsidiary of Parent. At the effective time of the Merger (the "Effective Time"), each Share then outstanding (other than Shares held by shareholders who perfect their dissenters' rights under Minnesota law) will be converted into the right to receive $15.50 in cash or any higher price per Share paid in the Offer (the "Offer Price"). The Merger Agreement is more fully described in Section 11, and is set forth in full as an annex to the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"), which is being mailed to shareholders of the Company herewith. The Offer and the Merger are sometimes collectively referred to herein as the "Transaction." THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE HAVING BEEN VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES WHICH, WHEN ADDED TO ANY SHARES ACQUIRED PURSUANT TO THE TENDER AGREEMENTS (AS DEFINED HEREIN), REPRESENTS AT LEAST A MAJORITY OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS (THE "MINIMUM CONDITION"). THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. SEE SECTION 14. IN CONNECTION WITH THE MERGER AGREEMENT, PARENT ENTERED INTO TENDER AGREEMENTS WITH CERTAIN SHAREHOLDERS OF THE COMPANY WHO COLLECTIVELY OWN APPROXIMATELY 13% OF THE OUTSTANDING SHARES, PURSUANT TO WHICH SUCH SHAREHOLDERS AGREED, AMONG OTHER THINGS, TO TENDER THEIR SHARES IN THE OFFER AND GRANT AN OPTION ON THEIR SHARES TO PARENT AT THE OFFER PRICE. THE BOARD OF DIRECTORS OF THE COMPANY AND A DISINTERESTED COMMITTEE OF THE BOARD OF DIRECTORS (AS CONTEMPLATED BY SECTIONS 302A.673 AND 302A.675 OF THE MINNESOTA BUSINESS CORPORATION ACT (THE "MBCA")) HAVE EACH UNANIMOUSLY APPROVED THE OFFER AND THE MERGER AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY'S SHAREHOLDERS, AND UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER ALL OF THEIR SHARES. SEE SECTION 11. Wasserstein Perella & Co., Inc. ("WP&Co."), the Company's financial advisor, has delivered to the Board of Directors of the Company its written opinion to the effect that, as of the date of such opinion, the cash consideration to be received in the Offer and the Merger, based upon and subject to the assumptions and limitations set forth in such opinion, by the Company's shareholders is fair to such shareholders from a financial point of view. Such opinion is set forth in full as an annex to the Company's Schedule 14D-9 which is being mailed to shareholders of the Company herewith. 4 The Merger Agreement provides that, except as provided therein, following satisfaction or waiver, if permissible, of the conditions to the Offer and subject to the terms and conditions thereof, the Purchaser will accept for payment, in accordance with the terms of the Offer, all Shares validly tendered pursuant to the Offer and not withdrawn as soon as it is permitted to do so pursuant to applicable law. The Offer will not remain open following the time Shares are accepted for payment. Under the MBCA, if the Purchaser acquires, pursuant to the Offer or otherwise, at least 90% of the outstanding Shares, the Purchaser will be able to approve the Merger Agreement and the transactions contemplated thereby without a vote of the shareholders. In such event, Parent, the Purchaser and the Company have agreed in the Merger Agreement to take, at the request of Parent and subject to the satisfaction of the conditions set forth in the Merger Agreement, all necessary and appropriate action to cause the Merger to become effective as soon as reasonably practicable after such acquisition, without a meeting of the shareholders, in accordance with Sections 302A.621 and 302A.641 of the MBCA. If, however, the Purchaser does not acquire at least 90% of the outstanding Shares pursuant to the Offer or otherwise and a vote of the shareholders is required under the MBCA, a significantly longer period of time would be required to effect the Merger. In the Merger Agreement, Parent, Purchaser and the Company have agreed that if immediately prior to the scheduled Expiration Date (as defined below) the Shares tendered pursuant to the Offer are less than 90% of the outstanding Shares, Purchaser may extend the Offer on one occasion for a period not to exceed 20 business days. See Section 15. The Purchaser presently intends to seek to cause the Company to make an application for the termination of the registration of the Shares under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as soon as possible after the purchase of all validly tendered Shares pursuant to the Offer if the requirements for termination of registration are met. See Section 7. In connection with the execution of the Merger Agreement, Parent entered into Tender and Option Agreements, each dated as of March 23, 1998 (the "Tender Agreements"), with each of Calvin S. Krupa, President, Chief Executive Officer and Chairman of the Board of the Company, and James A. Thole, Secretary of the Company (the "Executive Shareholders"), who own an aggregate of 509,550 Shares, or approximately 13% of the Shares outstanding on March 23, 1998, pursuant to which the Executive Shareholders agreed, among other things and upon the terms and conditions set forth therein, to tender their Shares in the Offer and grant an option on their Shares to Purchaser at the Offer Price, to vote such Shares in the manner specified in the Tender Agreements with respect to certain matters and to appoint Parent as the Executive Shareholders' proxy to vote such Shares in certain circumstances. The Tender Agreements are more fully described in Section 11. The Minimum Condition requires that the number of Shares validly tendered and not withdrawn prior to the expiration of the Offer, when added to any Shares acquired pursuant to the Tender Agreements, represent at least a majority of the Shares outstanding on a fully diluted basis. According to the Company, as of March 23, 1998, there were 3,893,791 Shares issued and outstanding, and there were outstanding options and warrants to purchase an aggregate of 637,524 Shares. The Merger Agreement provides, among other things, that the Company will not, without the prior written consent of Parent, issue any additional Shares (except on the exercise of outstanding options and warrants and as otherwise permitted under the Merger Agreement). Based on the foregoing and assuming that all outstanding options and warrants are exercised, the Minimum Condition will be satisfied if 2,265,658 Shares are validly tendered and not withdrawn prior to the expiration of the Offer, including those Shares acquired pursuant to the Tender Agreements. If the Minimum Condition is satisfied, Parent would be able to effect the Merger without the affirmative vote of any other shareholder of the Company. The Company has distributed one Right for each outstanding Share pursuant to the Rights Agreement, dated as of February 27, 1998, between the Company and Norwest Bank Minnesota, N.A., as Rights Agent, as amended (the "Rights Agreement"). Based on the information disclosed by the Company in connection with and prior to the Company entering the Merger Agreement, on March 23, 1998, the Company amended the Rights Agreement to provide that the execution of the Merger Agreement and any amendments thereto and the Tender Agreements and the consummation of the transactions contemplated by such agreements will 2 5 not cause (i) Parent and/or the Purchaser or their respective Affiliates or Associates to become an Acquiring Person (as such terms are defined in the Rights Agreement) unless the Merger Agreement and the Tender Agreements have been terminated in accordance with their respective terms, or (ii) a Distribution Date, a Shares Acquisition Date or a Triggering Event (as such terms are defined in the Rights Agreement) to occur, irrespective of the number of Shares acquired pursuant to the Offer, the Merger or the transactions contemplated by the Merger Agreement and the Tender Agreements. The Merger Agreement provides that, promptly upon the purchase of Shares by Parent, the Purchaser or any of Parent's subsidiaries which represent at least a majority of the outstanding Shares, Parent will be entitled to designate such number of directors, rounded up to the next whole number, to the Board as will give it representation equal to the product of the total number of directors on the Board (giving effect to the directors designated by Purchaser) multiplied by the percentage that the number of Shares so purchased bears to the total number of Shares then outstanding. In the Merger Agreement, the Company has agreed, upon the request of Purchaser, to use its best reasonable efforts promptly either to increase the size of the Board or secure the resignation of such number of incumbent directors, or both, as is necessary to enable Parent's designees to be so elected to the Board, and to take all actions available to the Company to cause Parent's designees to be so elected. However, until the Effective Time, the Board must include at least one director who is not affiliated with Parent and is designated in accordance with the terms of the Merger Agreement. The Purchaser estimates that the total funds required to purchase all Shares validly tendered pursuant to the Offer, consummate the Merger and pay all related costs and expenses will be approximately $87.7 million, including the repayment of certain of the Company's indebtedness. The Purchaser will obtain such funds from Parent by means of capital contributions, loans or a combination thereof. Parent plans to obtain the funds for such capital contributions or loans from available borrowings under its principal operating subsidiary's existing credit facility. See Section 10. The information contained in this Offer to Purchase concerning the Company was supplied by the Company, and Parent and the Purchaser take no responsibility for the accuracy of such information. The information contained in this Offer to Purchase concerning the Offer, the Merger, Parent and the Purchaser was supplied by Parent and the Purchaser, and the Company takes no responsibility for the accuracy of such information. THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. THE OFFER 1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the Offer, the Purchaser will accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn in accordance with Section 3 of this Offer to Purchase. The term "Expiration Date" shall mean 12:00 Midnight, New York City time, on Wednesday, April 22, 1998, unless and until the Purchaser, in accordance with the terms of the Merger Agreement, shall have extended the period of time for which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Purchaser, shall expire. The Offer is conditioned upon, among other things, the satisfaction of the Minimum Condition and the expiration or termination of all waiting periods imposed by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the regulations thereunder (the "HSR Act"). See Section 14. If such conditions are not satisfied prior to the Expiration Date, the Purchaser reserves the right (but shall not be obligated) to (i) decline to purchase any of the Shares tendered and terminate the Offer, subject to the terms of the Merger Agreement, (ii) waive any of the conditions to the Offer, to the extent permitted by applicable law and the provisions of the Merger Agreement, and, subject to complying with applicable rules and regulations of the Securities and Exchange Commission (the "Commission"), purchase all Shares validly 3 6 tendered or (iii) extend the Offer and, subject to the right of shareholders to withdraw Shares until the Expiration Date, retain the Shares which will have been tendered during the period or periods for which the Offer is extended. Subject to the terms of the Merger Agreement, the Purchaser expressly reserves the right, in its sole discretion, at any time or from time to time, (i) to extend the Offer on one or more occasions beyond the then-scheduled Expiration Date, if at the then-scheduled Expiration Date of the Offer any of the conditions to Purchaser's obligation to accept for payment and pay for the Shares have not been satisfied or waived, until such time as such conditions are satisfied or waived, provided, however, that if the sole condition remaining unsatisfied is the failure of the waiting period under the HSR Act to have expired or been terminated, the Purchaser shall extend the expiration date from time to time until two business days after the expiration of the waiting period under the HSR Act, (ii) increase the Offer Price payable pursuant to the Offer and extend the Offer for any period required by any rule, regulation, interpretation or provision of the Commission or the staff thereof applicable to the Offer, and (iii) extend the Offer on one occasion for an aggregate period of not more than 20 business days beyond the latest Expiration Date that would otherwise be permitted under clause (i) or (ii) of this sentence if there shall not have been validly tendered and not withdrawn pursuant to the Offer at least 90% of the outstanding Shares. The rights reserved by the Purchaser in this paragraph are in addition to the Purchaser's rights to terminate the Offer as described in Section 14. Any extension, amendment or termination will be followed as promptly as practicable by public announcement thereof, the announcement in the case of an extension to be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date in accordance with the public announcement requirements of Rule 14d-4(c) under the Exchange Act. Without limiting the obligation of the Purchaser under such Rule or the manner in which the Purchaser may choose to make any public announcement, the Purchaser currently intends to make announcements by issuing a release to the Dow Jones News Service. The Merger Agreement provides that, without the prior written consent of the Company, neither Parent nor the Purchaser will decrease the Offer Price or change the form of consideration payable in the Offer, decrease the number of Shares sought to be purchased pursuant to the Offer, change the conditions described in Section 14, impose additional conditions to the Offer or amend any other term of the Offer in any manner materially adverse to the holders of Shares. If the Purchaser extends the Offer, or if the Purchaser (whether before or after its acceptance for payment of Shares) is delayed in its purchase of or payment for Shares or 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 shareholders are entitled to withdrawal rights as described in Section 3. However, the ability of the Purchaser to delay the payment for Shares which the Purchaser has accepted for payment is limited by Rule 14e-l(c) under the Exchange Act, which requires that a bidder pay the consideration offered or return the securities deposited by or on behalf of holders of securities promptly after the termination or withdrawal of the Offer. If the Purchaser makes a material change in the terms of the Offer or the information concerning the Offer or 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(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during which the Offer must remain open following material changes in the terms of the Offer or information concerning the Offer, other than a change in price or a change in percentage of securities sought, will depend upon the facts and circumstances then existing, including the relative materiality of the changed terms or information. In a public release, the Commission has stated that in its view an offer must remain open for a minimum period of time following a material change in the terms of the Offer and that waiver of a material condition, such as the Minimum Condition, is a material change in the terms of the Offer. The release states that an offer should remain open for a minimum of five business days from the date a material change is first published, sent or given to security holders and that, if material changes are made with respect to information not materially less significant than the offer price and the number of shares being sought, a minimum of ten business days may be required to allow adequate dissemination and investor response. The requirement to extend the Offer will not apply to the extent that the 4 7 number of business days remaining between the occurrence of the change and the then-scheduled Expiration Date equals or exceeds the minimum extension period that would be required because of such amendment. As used in this Offer to Purchase, "business day" has the meaning set forth in Rule 14d-1 under the Exchange Act. The Company has provided the Purchaser with the Company's shareholder lists 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 by the Purchaser to record holders of Shares and will be furnished by the Purchaser to brokers, dealers, banks and similar persons whose names, or the names of whose nominees, appear on the shareholder lists or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. 2. PROCEDURE FOR TENDERING SHARES. Valid Tender. For Shares to be validly tendered pursuant to the Offer, either (i) a properly completed and duly executed Letter of Transmittal (or facsimile thereof), together with any required signature guarantees, or in the case of a book-entry transfer, an Agent's Message (as defined below), and any other required documents, must 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 and either certificates for tendered Shares must be received by the Depositary at one of such addresses or such Shares must be delivered pursuant to the procedures for book-entry transfer set forth below (and a Book-Entry Confirmation (as defined below) received by the Depositary), in each case prior to the Expiration Date, or (ii) the tendering shareholder must comply with the guaranteed delivery procedures set forth below. The Depositary will establish accounts with respect to the Shares at The Depository Trust Company and the Philadelphia Depository Trust Company (each, a "Book-Entry Transfer Facility" and, collectively, the "Book-Entry Transfer Facilities") for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in any of the Book-Entry Transfer Facilities' systems may make book-entry delivery of Shares by causing a Book-Entry Transfer Facility to transfer such Shares into the Depositary's account in accordance with that Book-Entry Transfer Facility's procedure for such transfer. However, although delivery of Shares may be effected through book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message, and any other required documents must, in any case, be transmitted to, and received by, the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the tendering shareholder must comply with the guaranteed delivery procedures described below. The confirmation of a book-entry transfer of Shares into the Depositary's account at a Book-Entry Transfer Facility as described above is referred to herein as a "Book-Entry Confirmation." DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. The term "Agent's Message" means a message transmitted by a Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Shares that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Purchaser may enforce such agreement against the participant. THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY 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. Signature Guarantees. No signature guarantee is required on the Letter of Transmittal (i) if the Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this Section, includes any 5 8 participant in any of the Book Entry Transfer Facilities' systems whose name appears on a security position listing as the owner of the Shares) of Shares tendered therewith and such registered holder has not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal or (ii) 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 (each, an "Eligible Institution" and, collectively, "Eligible Institutions"). In all other cases, all signatures on Letters of Transmittal must be guaranteed by an Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal. If the certificates for Shares are registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made or certificates for Shares not tendered or not accepted for payment are to be returned to a person other than the registered holder of the certificates surrendered, then the tendered certificates for such Shares must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered holders or owners appear on the certificates, with the signatures on the certificates or stock powers guaranteed as aforesaid. See Instructions 1 and 5 to the Letter of Transmittal. Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to the Offer and such shareholder's certificates for Shares are not immediately available or the procedures for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date, such shareholder's tender may be effected if all the following conditions are met: (i) such tender is made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Purchaser, is received by the Depositary, as provided below, prior to the Expiration Date; and (iii) the certificates for all physically tendered Shares, in proper form for transfer (or a Book-Entry Confirmation with respect to all such Shares), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other required documents are received by the Depositary within three trading days after the date of execution of such Notice of Guaranteed Delivery. A "trading day" is any day on which the New York Stock Exchange (the "NYSE") is open for business. The Notice of Guaranteed Delivery may be delivered by hand to the Depositary or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in such Notice of Guaranteed Delivery. Notwithstanding any other provision hereof, payment for Shares accepted for payment pursuant to the Offer will in all cases be made only after timely receipt by the Depositary of (i) certificates for (or a timely Book-Entry Confirmation with respect to) such Shares, (ii) a Letter of Transmittal (or 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 (iii) any other documents required by the Letter of Transmittal. Accordingly, tendering stockholders may be paid at different times depending upon when certificates for Shares or Book-Entry Confirmations with respect to Shares are actually received by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID BY THE PURCHASER FOR THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. The valid tender of Shares pursuant to one of the procedures described above will constitute a binding agreement between the tendering shareholder and the Purchaser upon the terms and subject to the conditions of the Offer. Appointment. By executing the Letter of Transmittal as set forth above, the tendering shareholder will irrevocably appoint designees of the Purchaser, and each of them, as such shareholder's attorneys-in-fact and proxies in the manner set forth in the Letter of Transmittal, each with full power of substitution, to the full extent of such shareholder's rights with respect to the Shares tendered by such shareholder and accepted for payment by the Purchaser and with respect to any and all other Shares or other securities or rights issued or 6 9 issuable in respect of such Shares on or after March 26, 1998. All such proxies will 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 for payment Shares tendered by such shareholder as provided herein. Upon such appointment, all prior powers of attorney, proxies and consents given by such shareholder with respect to such Shares or other securities or rights will, without further action, be revoked and no subsequent powers of attorney, proxies, consents or revocations may be given by such shareholder (and, if given, will not be deemed effective). The designees of the Purchaser will thereby be empowered to exercise all voting and other rights with respect to such Shares and other securities or rights, including, without limitation, in respect of any annual, special or adjourned meeting of the Company's shareholders, actions by written consent in lieu of any such meeting or otherwise, as they in their sole discretion deem proper. The Purchaser reserves the right to require that, in order for Shares 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 other related securities or rights, including voting at any meeting of shareholders. Determination of Validity. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of any tender of Shares will be determined by the Purchaser in its sole discretion, which determination will be final and binding. The Purchaser reserves the absolute right to reject any or all tenders of any Shares determined by it not to be in proper form or the acceptance for payment of, or payment for which may, in the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute right, subject to the provisions of the Merger Agreement, to waive any of the conditions of the Offer or any defect or irregularity in the tender of any Shares of any particular shareholder, whether or not similar defects or irregularities are waived in the case of other shareholders. No tender of Shares will be deemed to have been validly made until all defects or irregularities relating thereto have been cured or waived. None of the Purchaser, Parent, 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. Backup Withholding. In order to avoid "backup withholding" of U.S. federal income tax on payments of cash pursuant to the Offer, a shareholder surrendering Shares in the Offer must, unless an exemption applies, provide the Depositary with such shareholder'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 shareholder is not subject to backup withholding. If a shareholder does not provide such shareholder's correct TIN or fails to provide the certifications described above, the Internal Revenue Service (the "IRS") may impose a penalty on such shareholder and payment of cash to such shareholder pursuant to the Offer may be subject to backup withholding of 31%. All shareholders 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 shareholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. Foreign shareholders, if exempt, should complete and sign the main signature form and a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. See Instruction 9 to the Letter of Transmittal. 3. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 3, tenders of Shares are irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to the procedures set forth below at any time prior to the Expiration Date and, unless theretofore accepted for payment and paid for by the Purchaser pursuant to the Offer, may also be withdrawn at any time after Sunday, May 24, 1998. 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 of this Offer to Purchase and must specify the name of the person having tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn, if different from 7 10 the name of the person who tendered the Shares. If certificates for Shares have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares have been tendered by an Eligible Institution, the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been delivered pursuant to the procedures for book-entry transfer as set forth in Section 2, any notice of withdrawal must also specify the name and number of the account at the appropriate Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's procedures. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in Section 2 any time on or prior to the Expiration Date. All questions as to the form and validity (including time of receipt) of notices of withdrawal will be determined by the Purchaser in its sole discretion, which determination will be final and binding. None of the Purchaser, Parent, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. 4. ACCEPTANCE FOR PAYMENT AND PAYMENT. 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), the Purchaser will accept for payment and will pay, promptly after the Expiration Date, for all Shares validly tendered prior to the Expiration Date and not properly withdrawn in accordance with Section 3. All determinations concerning the satisfaction of such terms and conditions will be within the Purchaser's discretion, which determinations will be final and binding. See Sections 1 and 14. The Purchaser expressly reserves the right, in its sole discretion, to delay acceptance for payment of or payment for Shares in order to comply in whole or in part with any applicable law, including, without limitation, the HSR Act. Any such delays will be effected in compliance with Rule 14e-l(c) under the Exchange Act (relating to a bidder's obligation to pay for or return tendered securities promptly after the termination or withdrawal of such bidder's offer). In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for such Shares (or a timely Book-Entry Confirmation with respect thereto), (ii) a Letter of Transmittal (or 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 (iii) any other documents required by the Letter of Transmittal. The per Share consideration paid to any shareholder pursuant to the Offer will be the highest per Share consideration paid to any other shareholder pursuant to the Offer. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares properly tendered to the Purchaser and not 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. Payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payment from the Purchaser and transmitting payment to tendering shareholders. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE TO BE PAID BY THE PURCHASER FOR THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR ANY DELAY IN MAKING SUCH PAYMENT. If the Purchaser is delayed in its acceptance for payment of, or payment for, Shares or is unable to accept for payment or pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer (including such rights as are set forth in Sections 1 and 14) (but subject to compliance with Rule 14e-1(c) under the Exchange Act), the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent tendering shareholders are entitled to exercise, and duly exercise, withdrawal rights as described in Section 3. 8 11 If any tendered Shares are not purchased pursuant to the Offer for any reason, certificates for any such Shares will be returned, without expense to the tendering shareholder (or, in the case of Shares delivered by book-entry transfer of such Shares into the Depositary's account at a Book-Entry Transfer Facility pursuant to the procedures set forth in Section 2, such Shares will be credited to an account maintained at the appropriate Book-Entry Transfer Facility), as promptly as practicable after the expiration or termination of the Offer. Subject to the terms of the Merger Agreement, the Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to Parent, or to one or more direct or indirect wholly-owned subsidiaries of Parent, the right to purchase 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 shareholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for Shares pursuant to the Offer or the Merger will be a taxable transaction for U.S. federal income tax purposes and also may be a taxable transaction under state, local or foreign tax laws. Accordingly, a shareholder who tenders Shares in the Offer or receives cash in exchange for Shares in the Merger (including as a result of perfecting his dissenters' rights under the MBCA) will recognize gain or loss for federal income tax purposes equal to the difference, if any, between the amount of cash received and the shareholder's tax basis in the Shares sold. Gain or loss will be determined separately for each block of Shares (i.e., Shares acquired at the same time and price) exchanged pursuant to the Offer or the Merger. Such gain or loss generally will be capital gain or loss if the Shares disposed of were held as capital assets by the shareholder, and will be long-term capital gain or loss if the Shares disposed of were held for more than one year at the date of sale or the Expiration Date (in the case of the Offer) or on the date of the Merger (in the case of the Merger), as the case may be. In addition, the Taxpayer Relief Act of 1997 could affect the federal income tax consequences of the Offer and Merger in that, among other things, it reduces the maximum rate of federal income tax on capital gains of individual taxpayers for capital assets held more than 18 months. Shares held less than one year may be subject to ordinary income tax rates of up to 39.6% for individuals. The foregoing summary constitutes a general description of certain U.S. federal income tax consequences of the Offer and the Merger without regard to the particular facts and circumstances of each shareholder of the Company and is based on the provisions of the Internal Revenue Code of 1986, as amended (the "Code"), Treasury Department Regulations issued pursuant thereto and published rulings and court decisions in effect as of the date hereof, all of which are subject to change, possibly with retroactive effect. Special tax consequences not described herein may be applicable to certain shareholders subject to special tax treatment (including insurance companies, tax-exempt organizations, financial institutions or broker dealers, foreign shareholders and shareholders who have acquired their Shares pursuant to the exercise of employee stock options or otherwise as compensation). ALL SHAREHOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO SPECIFIC TAX EFFECTS APPLICABLE TO THEM OF THE OFFER AND THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT OF THE ALTERNATIVE MINIMUM TAX AND ANY STATE, LOCAL AND FOREIGN TAX LAWS. 6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES. The Shares are traded through the Nasdaq National Market under the symbol "UPAC." The following table sets forth, for each of the periods indicated, the high and low reported sales price per Share on the Nasdaq National Market. 9 12
HIGH LOW ------- ------ 1996: First Quarter................................... $ 4.000 $2.750 Second Quarter.................................. 4.438 2.750 Third Quarter................................... 3.750 2.500 Fourth Quarter.................................. 4.250 2.625 1997: First Quarter................................... $ 6.000 $3.500 Second Quarter.................................. 7.500 5.375 Third Quarter................................... 10.000 6.688 Fourth Quarter.................................. 10.188 8.750 1998: First Quarter (through March 25, 1998).......... $15.125 $6.375
On March 20, 1998, the last full trading day prior to the public announcement of the execution of the Merger Agreement by the Company, Parent and Purchaser, the last reported sales price of the Shares on the Nasdaq National Market was $6.688 per Share. On March 25, 1998, the last full trading day prior to the commencement of the Offer, the last reported sales price of the Shares on the Nasdaq National Market was $15.125 per Share. SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES. The Company has never paid any cash dividends on the Shares. The Merger Agreement provides that, without the prior written consent of Parent, the Company will not declare, set aside or pay any dividend on or make any other distribution in respect of its capital stock. See Section 11. The Company has advised the Purchaser that the Company currently intends to retain earnings for use in its operations and therefore does not intend to pay any cash dividends for the foreseeable future. In addition, one of the Company's current loan agreements prohibits the payment of dividends. 7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK LISTING; EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS. 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 and, depending upon the number of Shares so purchased, could adversely effect the liquidity and market value of the remaining Shares held by the public. Stock Quotation. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the requirements for continued inclusion in the Nasdaq National Market, which requires that there be at least 200,000 shares publicly held, with a market value of at least $1,000,000, held by at least 400 stockholders or 300 stockholders of round lots. Shares held directly or indirectly by directors, officers or beneficial owners of more than 10% of the Shares are not considered as being publicly held for this purpose. If the Nasdaq National Market were to cease to publish quotations for the Shares, it is possible that the Shares would continue to trade in the over-the-counter market and that prices or other quotations would be reported by 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 presently "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which status has the effect, among other things, of allowing brokers to extend credit on the collateral of such securities. Depending upon factors similar to those described above regarding listing and market 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 currently are registered under the Exchange Act. Registration of the Shares under the Exchange Act may be terminated upon application of the Company to the Commission 10 13 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 shareholders and to the Commission and would make certain provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b), the requirement of furnishing a proxy statement pursuant to Section 14(a) in connection with shareholders' meetings and the related requirement of furnishing an annual report to shareholders and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions, no longer applicable to the Company. 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 or Rule 144A promulgated under the Securities Act of 1933, as amended (the "Securities Act"), 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 continued inclusion in the Nasdaq National Market. If registration of the Shares is not terminated prior to the Merger, then the Shares will cease to be reported on the Nasdaq National Market and the registration of the Shares under the Exchange Act will be terminated following the consummation of the Merger. 8. CERTAIN INFORMATION CONCERNING THE COMPANY. General. The information concerning the Company contained in this Offer to Purchase, including that set forth below under the caption "Selected Financial Information," has been furnished by the Company or has been taken from or based upon publicly available documents and records on file with the Commission and other public sources. Neither Parent nor Purchaser assumes responsibility for the accuracy or completeness of the information concerning the Company contained in such documents and records or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of any such information but which are unknown to Parent or Purchaser. The Company designs, manufactures, markets and sells plastic containers and packaging for the food industry, including supermarkets, distributors of food packaging, wholesale bakery companies, fruit and vegetable growers, delicatessens, processors and retailers of prepared foods, and foodservice providers. The Company's packaging is primarily made from virgin or recycled polyethylene terephthalate which the Company extrudes into plastic sheet and thermoforms into various shapes. The Company is a Minnesota corporation with its principal executive offices at 21925 Industrial Boulevard, Rogers, Minnesota 55374. The telephone number of the Company at such location is (612) 428-8340. Selected Financial Information. Set forth below is certain selected financial information with respect to the Company, excerpted or derived from the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 1997, and from the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended October 31, 1997, each filed with the Commission pursuant to the Exchange Act. More comprehensive financial information is included in such reports and in other documents filed by the Company with the Commission. The following summary is qualified in its entirety by reference to such reports and other documents and all of the financial information (including any related notes) contained therein. Such reports and other documents may be inspected and copies may be obtained from the Commission in the manner set forth below. 11 14 ULTRA PAC, INC. SELECTED FINANCIAL INFORMATION
FISCAL YEARS ENDED JANUARY 31, ---------------------------------------------------- 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- (IN THOUSANDS, EXCEPT FOR EARNINGS PER COMMON SHARE) Statements of Earnings Data Net sales.................................... $61,719 $66,129 $57,250 $41,189 $27,572 Cost of products sold........................ 42,156 54,187 41,625 30,521 19,688 ------- ------- ------- ------- ------- Gross profit.............................. 19,563 11,942 15,625 10,668 7,884 Operating expenses Marketing and sales....................... 10,647 11,481 10,066 8,202 5,287 Administrative............................ 2,750 2,760 2,347 1,549 1,728 ------- ------- ------- ------- ------- 13,397 14,241 12,413 9,751 7,015 ------- ------- ------- ------- ------- Operating profit (loss)................... 6,166 (2,299) 3,212 917 869 Interest expense and other................... 3,223 2,581 1,507 842 413 ------- ------- ------- ------- ------- Earnings (loss) before income tax......... 2,943 (4,880) 1,705 75 456 Income tax provision (benefit)............... 1,144 (1,721) 654 16 186 ------- ------- ------- ------- ------- Net Earnings (Loss)....................... $ 1,799 $(3,159) $ 1,051 $ 59 $ 270 ======= ======= ======= ======= ======= Earnings (loss) per common share............. $ .47 $ (.84) $ .28 $ .02 $ .08 ======= ======= ======= ======= ======= Weighted average number of shares outstanding............................... 3,792 3,766 3,766 3,768 3,587 ======= ======= ======= ======= =======
JANUARY 31, ----------------------------------------------- 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- Balance Sheet Data Working capital.............................. $ 270 $ 2,685 $ 6,771 $ 5,632 $ 5,084 Total assets................................. 41,736 50,581 44,322 32,801 23,503 Long-term obligations........................ 15,978 27,235 20,227 13,652 6,564 Shareholders' equity......................... 11,528 9,427 12,587 11,533 11,474
12 15
NINE MONTHS ENDED OCTOBER 31, ------------------------- 1997 1996 ---- ---- (IN THOUSANDS, EXCEPT FOR EARNINGS PER COMMON SHARE) Statements of Earnings Data Net sales........................................... $ 47,499 $ 49,036 Cost of products sold............................... 28,674 34,283 ---------- ---------- Gross profit..................................... 18,825 14,753 Operating expenses Marketing and sales.............................. 9,724 8,085 Administrative................................... 2,387 2,074 ---------- ---------- 12,111 10,159 ---------- ---------- Operating profit (loss).......................... 6,714 4,594 Interest expense and other.......................... (1,360) (2,802) ---------- ---------- Earnings (loss) before income tax................ 5,354 1,792 Income tax provision (benefit)...................... 2,015 716 ---------- ---------- Net Earnings (Loss).............................. $ 3,339 $ 1,076 ========== ========== Earnings (loss) per common share.................... $ 0.83 $ 0.28 ========== ========== Weighted average number of shares outstanding....... 4,031,140 3,784,700 ========== ==========
OCTOBER 31, 1997 ---------------- Balance Sheet Data Working capital........................................... $ 2,569 Total assets.............................................. 41,738 Long-term obligations..................................... 12,605 Shareholders' equity...................................... 15,178
Certain Estimates Prepared by the Company. During the course of the discussions between Parent and the Company that led to the execution of the Merger Agreement, the Company provided Parent with certain information about the Company which is not publicly available. The information provided included financial forecasts which contain, among other things, the summary financial information set forth below. The Company does not, as a matter of course, publicly disclose forward-looking information (such as the financial forecasts referred to below) as to future revenues, earnings or other financial information. Such forward-looking information was prepared by the Company solely for internal use and not for publication or with a view to complying with the published guidelines of the Commission regarding projections, or those of any other regulatory or professional agency or body, generally accepted accounting principles or consistency with the Company's audited financial statements or with the American Institute of Certified Public Accountants Guide for Prospective Financial Statements and are included in this Offer to Purchase only because they were furnished to Parent. Although presented with numerical specificity, the financial forecasts necessarily make numerous assumptions with respect to industry performance, general business and economic conditions, access to markets and distribution channels, availability and pricing of raw materials and other matters, all of which are inherently subject to significant uncertainties and contingencies and many of which are beyond the Company's control. One cannot predict whether the assumptions made in preparing the financial forecasts will be accurate, and actual results may be materially higher or lower than those contained in the forecasts. THE INCLUSION OF THIS FORWARD-LOOKING INFORMATION SHOULD NOT BE REGARDED AS FACT OR AN INDICATION THAT PARENT, THE PURCHASER, THE COMPANY OR ANYONE WHO RECEIVED THIS INFORMATION CONSIDERED IT A RELIABLE PREDICTOR OF FUTURE RESULTS, AND THIS INFORMATION SHOULD NOT BE RELIED ON AS SUCH. NONE OF PARENT, THE PURCHASER OR THE COMPANY ASSUMES ANY RESPONSIBILITY FOR THE VALIDITY, REASONABLENESS, ACCURACY OR COMPLETENESS OF THE FORECASTS. 13 16 ULTRA PAC, INC. SELECTED ESTIMATED FINANCIAL INFORMATION (Prepared by Ultra Pac, Inc.) (dollars in millions)
FISCAL YEAR ENDED JANUARY 31, ----------------------------------------------------- 1998 1999 2000 2001 (UNAUDITED) (ESTIMATED) (ESTIMATED) (ESTIMATED) ----------- ----------- ----------- ----------- Net sales......................................... $62.1 $74.9 $84.8 $96.3 Gross profit...................................... 23.7 27.5 29.9 32.7 EBIT(1)........................................... 7.4 9.1 9.4 9.7 Net income........................................ 3.6 4.9 5.3 5.7 EBITDA(2)......................................... 11.6 13.7 14.5 15.6
- ------------------------- (1) EBIT represents earnings before interest expense and taxes. (2) EBITDA represents earnings before interest expense, taxes and depreciation and amortization expenses. Net sales were projected based on the Company's estimates of volume of shipments of the Company's products, changes in the Company's product mix and pricing assumptions for the projected periods. Gross profit was projected based upon projected costs developed by the Company considering the Company's operations and raw material costs. Available Information. The Company is subject to the informational requirements of the Exchange Act, and in accordance therewith, files reports, proxy statements and other information with the Commission. Such reports, proxy statements and other information can be inspected and copied at the public reference facilities of the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and at the regional offices of the Commission located at Seven World Trade Center, 13th Floor, Suite 1300, New York, New York 10048 and Suite 1400, Citicorp Center, 14th Floor, 500 West Madison Street, Chicago, Illinois 60661. Copies of such material can also be obtained at prescribed rates by writing to the Public Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. The Commission maintains a Web site (located at http://www.sec.gov) which includes reports, proxy statements and other information filed electronically by registrants with the Commission. 9. CERTAIN INFORMATION CONCERNING PARENT AND THE PURCHASER. Parent is a vertically integrated speciality packaging company that designs and manufactures value-added plastic and paper-based flexible packaging products for consumer and industrial packaging markets. Parent focuses on niche markets which management believes provide attractive margins and growth and where Parent's integrated manufacturing capabilities can enhance its competitive position. Parent serves a variety of markets, providing packaging for food, medical devices and electronic goods and protective packaging for industrial products. Purchaser is a newly incorporated Minnesota corporation organized in connection with the Offer and the Merger and has not carried on any activities other than in connection with the Offer and the Merger. All of the outstanding capital stock of Purchaser is owned indirectly by Parent. Until immediately prior to the time Purchaser purchases Shares pursuant to the Offer, it is not anticipated that Purchaser will have any significant assets or liabilities or engage in activities other than those incident to its formation and capitalization and the transactions contemplated by the Offer and the Merger. The principal offices of Purchaser and Parent are located at 100 Tri-State Drive, Lincolnshire, Illinois 60069. The telephone number of Parent and Purchaser at such location is (847) 945-9100. Pursuant to the Tender Agreements, Parent and Purchaser have acquired from the Executives options to purchase an aggregate of 509,550 Shares, which constitutes beneficial ownership of such Shares for certain 14 17 purposes. See Section 11. Such Shares constitute approximately 13% of the total currently outstanding Shares. See Section 11. Except as set forth in this Offer to Purchase, neither the Purchaser, Parent, any of their respective affiliates nor, to the best of their knowledge, any of the persons listed on Schedule I, 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 the voting of any securities of the Company, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss, or the giving or withholding of proxies. The Company and certain subsidiaries of Parent have from time to time engaged in commercial transactions in the ordinary course of their respective businesses. Except as set forth in this Offer to Purchase, neither the Purchaser nor Parent, nor to the best of the knowledge of the Purchaser and Parent, any of the persons listed on Schedule I, has entered into any transaction with the Company, or any of the Company's affiliates which are corporations, since the commencement of the Company's third full fiscal year preceding the date of this Statement, the aggregate amount of which was equal to or greater than one percent of the consolidated revenues of the Company for (i) the fiscal year in which such transaction occurred, or (ii) the portion of the current fiscal year which has occurred if the transaction occurred in such year. Except as set forth in this Offer to Purchase, neither the Purchaser, Parent, any of their respective affiliates, nor, to the best of their knowledge, any of the persons listed on Schedule I, has had, since December 31, 1994, any business relationships or transactions with the Company or any of its executive officers, directors or affiliates that would require reporting under the rules of the Commission. Except as set forth in this Offer to Purchase, since December 31, 1994, there have been no contacts, negotiations or transactions between the Purchaser, Parent, any of their respective affiliates or, to the best of their knowledge, any of the persons listed on Schedule I, and the Company or its affiliates concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, election of directors or a sale or other transfer of a material amount of assets. Additional information concerning Parent is set forth in Parent's Annual Report on Form 10-K for the fiscal year ended December 31, 1997, which report may be obtained from the Commission in the manner set forth under "Available Information," below. Available Information. Parent is subject to the informational requirements of the Exchange Act, and in accordance therewith, files reports, proxy statements and other information with the Commission. Such reports, proxy statements and other information can be inspected and copied at the public reference facilities of the Commission at Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and at the regional offices of the Commission located at Seven World Trade Center, 13th Floor, Suite 1300, New York, New York 10048 and Suite 1400, Citicorp Center, 14th Floor, 500 West Madison Street, Chicago, Illinois 60661. Copies of such material can also be obtained at prescribed rates by writing to the Public Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549. In addition, such reports, proxy statements and other information concerning Parent can be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. The Commission maintains a Web site (located at http://www.sec.gov) which includes reports, proxy statements and other information filed electronically by registrants with the Commission. 10. SOURCE AND AMOUNT OF FUNDS. The Purchaser estimates that the total funds required to purchase all Shares validly tendered pursuant to the Offer, consummate the Merger and pay all related costs and expenses will be approximately $87.7 million, including the repayment of certain of the Company's indebtedness. The Purchaser will obtain such funds from Parent by means of capital contributions, loans or a combination thereof. Parent plans to obtain the funds for such capital contributions or loans from available borrowings under the existing credit facility of IPC, Inc., Parent's principal operating subsidiary (the "Credit Facility"), which provides for maximum borrowings of an aggregate principal amount of up to $475.0 million, consisting of term loans of $300.0 million and a revolving credit facility of up to $175.0 million. The transactions contemplated by the Merger Agreement would violate certain provisions of the Credit Facility. Parent has requested the consent of the required lenders under the 15 18 Credit Facility to the Offer and Merger, and Parent anticipates that the required lenders will provide such consent. The Credit Facility is comprised of a $150.0 million Term A Loan, $150.0 million Term B Loan and $175.0 million revolving credit facility (up to $65.0 million of which may be in the form of letters of credit). The Term A Loan is required to be repaid in quarterly payments totaling $3.75 million in 1997, $16.25 million in 1998, $21.25 million in 1999, $25.0 million in 2000, $26.25 million in 2001, $31.25 million in 2002 and $26.25 million in 2003 and the Term B Loan is required to be repaid in quarterly payments totaling $1.5 million per annum through September 30, 2003 and four installments of $35.25 million on December 31, 2003, March 31, 2004, June 30, 2004 and September 30, 2004. The interest rate of the Credit Facility can be, at the election of IPC, Inc., based upon LIBOR or the Adjusted Base Rate, as defined therein, and is subject to certain performance pricing adjustments. The Term A Loan and loans under the revolving credit facility bear interest at rates up to LIBOR plus 1.625% or the Adjusted Base Rate plus 0.625%. As of December 31, 1997, such rates are 1.375% plus LIBOR. The Term B Loan bears interest at rates up to LIBOR plus 2.00% or the Adjusted Base Rate plus 1.0%. As of December 31, 1997, such rates are 1.75% plus LIBOR. Borrowings are secured by substantially all the assets of Parent and its subsidiaries. The revolving credit facility and Term A Loan will terminate on September 30, 2003 and the Term B Loan will terminate on September 30, 2004. Under the Credit Facility, IPC, Inc. is required to maintain certain financial ratios and levels of net worth and future indebtedness and dividends are restricted, among other things. No plans or arrangements have been made to refinance or repay borrowings under the Credit Facility. It is anticipated that any borrowings incurred by the Purchaser in connection with the Offer will be repaid from internally generated funds of Parent, the Purchaser and the Company and/or refinanced in the private or public markets. 11. BACKGROUND OF THE OFFER; THE MERGER AGREEMENT AND CERTAIN OTHER AGREEMENTS The following description was prepared by Parent and the Company. Information about the Company was provided by the Company and neither the Purchaser nor Parent takes any responsibility for the accuracy or completeness of any information regarding meetings or discussions in which Purchaser, Parent or their representatives did not participate. BACKGROUND OF THE OFFER Over the last several years, from time to time, George V. Bayly, Chairman of the Board, President and Chief Executive Officer of Parent, contacted Calvin S. Krupa, Chairman of the Board, President and Chief Executive Officer of the Company, to express Parent's interest in exploring the possibility of a business combination with the Company. On these occasions, Mr. Krupa indicated that the Company was not for sale. On January 22, 1998, Mr. Bayly called Mr. Krupa to reiterate Parent's interest in a possible business combination with the Company and to express his willingness to meet and discuss the terms of such a possible transaction. Mr. Krupa again advised Mr. Bayly that the Company was not for sale and declined to meet with Mr. Bayly, but said he would discuss with his Board of Directors the possibility of having a meeting. On January 27, 1998, Mr. Bruce Boehm, an advisor to the Company, called Mr. Bayly to inquire as to the nature of Parent's interest in pursuing an acquisition with the Company. During the next two weeks, Mr. Boehm and Mr. Tannura, Parent's Chief Financial Officer, had several telephone conversations regarding the structure, process and valuation of a possible acquisition and the timing for a possible meeting between the management of the Company and Parent. Mr. Boehm and Mr. Tannura also discussed a preliminary valuation for the Company's Common Stock, with Mr. Tannura suggesting a value of $11.00 per share. On February 9, 1998, Mr. Bayly sent Mr. Krupa a letter (reprinted below) again expressing an interest regarding a potential business combination with the Company. 16 19 The text of the letter sent by Mr. Bayly to Mr. Krupa on February 9, 1998 is as follows: Via Federal Express February 9, 1998 Mr. Calvin S. Krupa Chairman of the Board, President and Chief Executive Officer Ultra Pac, Inc. 21925 Industrial Blvd. Rogers, Minnesota 55374 Dear Mr. Krupa: I have believed for quite some time that there is an important strategic role for PET in Ivex's Consumer Packaging business. As you know from our January 22, 1998 telephone conversation, we are very interested in meeting with you to discuss the possibility of combining our respective companies. Since our January 22nd telephone call, Frank Tannura, our CFO, and I have, at your request, attempted to pursue these discussions with your advisor, Bruce Boehm, without much success. Because of your inability or unwillingness to arrange a meeting with us, I find it necessary to communicate to you in this letter. I want you to know that given the success of Ivex's recently completed initial public offering and the current breadth of our Consumer Packaging business (various materials and international presence), our interest in significantly expanding our PET business is greater today than it has ever been. As you may or may not be aware, Ivex has been investing internally in PET extrusion and thermoforming over the past few years and expects to invest significant capital in our PET business (both internally and through acquisition) during 1998 and 1999. We believe that there are clear and compelling advantages to both Ivex and Ultra Pac from the combination of our two companies and that such a transaction would create significant value for each of our two companies and our respective stockholders. We are extremely impressed with the business that you and your management team have developed and the manner in which it would complement our business. We believe that the complementary aspects of our two companies' products, customers and distribution capabilities would enable the combined entity to be an even more effective competitor. As I have briefly discussed with you and as Frank Tannura has emphasized to Mr. Boehm, we are prepared to meet with you and/or your representatives at your earliest convenience to discuss our ideas and to negotiate a mutually satisfactory merger transaction (at a significant premium over current market value) which we are confident could be quickly and successfully concluded. We have existing bank availability and/or Ivex stock to fund any proposed transaction that best serves your shareholders. We hope that you and your Board of Directors will view our proposal to combine our respective companies as an excellent opportunity for the Ultra Pac stockholders to realize the full value of their shares (to an extent not likely to be available to them in the marketplace in the foreseeable future). In the context of a negotiated, friendly transaction, we are prepared to discuss all aspects of our proposal fully with you and would hope and expect that you and your management team would manage our combined PET business. At this point, we hope that you will agree that the best way to proceed would be to begin confidential, non-public discussions to see if we can quickly negotiate a transaction that can be presented to your stockholders as the joint effort of Ivex's and Ultra Pac's Board of Directors and management. Therefore, at this point, we hope 17 20 this letter and its contents will remain private between us, although we believe that your shareholders may be interested in learning more about our ideas. We would appreciate it if you and your Board of Directors will give this proposal prompt and serious consideration. We would request a response as soon as possible, and preferably no later than February 13, 1998. Sincerely yours, George V. Bayly Chairman, President and Chief Executive Officer After receiving Mr. Bayly's letter, Frank Harvey, a Director of the Company, called Parent to ascertain possible dates for a meeting between the management of the Company and Parent. On February 25, 1998, the Company retained WP&Co. as the Company's financial advisor. On February 25, 1998 and February 26, 1998, the Company's Board of Directors, its legal advisors and representatives of WP&Co. met to discuss the Company's strategic alternatives in light of the potential values that might be achieved for shareholders of the Company through the sale of the Company, through continued implementation of the Company's strategic plan as an independent company and through other possible strategies. At the conclusion of the meeting, the Board of Directors authorized WP&Co. to approach a limited number of potential acquirors to determine their level of interest regarding a potential strategic transaction with the Company and directed management to meet with and listen to a possible proposal from Parent. The Board of Directors also adopted a shareholder rights plan and amendments to the Company's bylaws regarding certain notice provisions. On March 2, 1998, the Company and Parent entered into a confidentiality agreement preceding Parent's review of confidential information regarding the Company, and members of the Company's and Parent's management met. During such meeting, Parent indicated that it would be interested in discussing the acquisition of the Shares, pursuant to a merger transaction, at a price in the range of $12.00 per share, subject to certain conditions. Also on March 2, 1998, WP&Co., on behalf of the Company, began to approach a limited number of potential acquirors to determine their level of interest regarding a potential strategic transaction with the Company. On March 8, 1998, the Company's Board held a special meeting to explore further the Company's strategic alternatives. The Company's management and representatives of WP&Co. reported to the Board the status of discussions with Parent and the results of WP&Co.'s preliminary discussions with other potential acquirors. On March 10, 1998, WP&Co. met with representatives of Parent to discuss possible purchase price ranges for the Company and the nature and extent of Parent's proposed due diligence investigation of the Company. Thereafter, representatives of the Company and the Company's financial advisors had several telephone conversations with representatives of Parent to review business issues with respect to a possible transaction with Parent. On March 14, 1998, representatives of the Company, its legal advisors and WP&Co. held a conference call to discuss the indications of interests received to date from other potential acquirors. On March 16, 1998, the Company delivered to Parent certain limited due diligence information for Parent's review. The information shared with Parent included financial projections prepared by the Company's management (see Section 8). 18 21 On March 18, 1998, a representative of Parent conducted certain financial due diligence at the Company's auditors and on March 19, 1998, representatives of Parent toured the Company's manufacturing facility in Rogers, Minnesota and met with the Company's management to discuss further the nature and performance of the Company's business. During the evening of March 19, 1998, members of senior management of the Company and Parent met to continue discussions concerning Parent's valuation of the Company. The parties discussed a range of $15 to $18 per share in cash as merger consideration, as well as other terms of a possible transaction. The parties considered that a value of $17.60 a share was appropriate to discuss with their respective Boards and directed their respective legal advisors to negotiate the terms of a definitive merger agreement providing for Parent's acquisition of the Company for cash. Negotiations between the Company and Parent continued from March 20 through the early morning on March 23, 1998. Following meetings of its Board of Directors, Parent presented the Company with an offer of $15.50 per Share, and, after further negotiations between the parties and receipt of the opinion of WP&Co., the Company's Board of Directors and a Special Committee established pursuant to the MBCA approved the Merger Agreement and the transactions contemplated thereby. Following this approval, the Merger Agreement and the Tender Agreements were executed, and the transaction was publicly announced on March 23, 1998. MERGER AGREEMENT The following is a summary of certain provisions of the Merger Agreement. The summary is qualified in its entirety by reference to the Merger Agreement which is incorporated herein by reference and a copy of which has been filed with the Commission as an exhibit to the Schedule 14D-1. The Merger Agreement is set forth in full as an annex to the Company's Schedule 14D-9 which is being mailed to shareholders of the Company herewith. The Merger Agreement also may be examined and copies may be obtained at the places and in the manner set forth in Section 8 of this Offer to Purchase. Capitalized terms used but not defined in this summary of the Merger Agreement have the meanings given to such terms in the Merger Agreement. The Offer. The Merger Agreement provides that the Purchaser will commence the Offer and that, upon the terms and subject to the prior satisfaction or waiver of the conditions of the Offer, the Purchaser will purchase all Shares validly tendered and not properly withdrawn pursuant to the Offer as soon as legally permitted after the expiration date of the Offer. The Merger Agreement provides that, without the prior written consent of the Company, neither the Purchaser nor Parent may decrease the price per Share or change the form of consideration payable in the Offer, decrease the number of Shares sought to be purchased in the Offer, or amend any other condition of the Offer in any manner adverse to the holders of the Shares; provided, however, that if on the initial scheduled expiration date of the Offer which shall be 20 business days after the date of the Offer is commenced, the sole condition remaining unsatisfied is the failure of the waiting period under the HSR Act to have expired or been terminated, the Purchaser shall extend the expiration date from time to time until two business days after the expiration of the waiting period under the HSR Act. The Purchaser shall, on the terms and subject to the prior satisfaction or waiver of the conditions of the Offer, accept for payment and pay for the Shares tendered as soon as it is legally permitted to do so under applicable law; provided, however, that if, immediately prior to the initial expiration date of the Offer (as it may be extended), the Shares tendered and not withdrawn pursuant to the Offer equals less than 90% of the outstanding Shares, the Purchaser may extend the Offer one time for a period not to exceed twenty business days, notwithstanding that all conditions to the Offer are satisfied as of such expiration date of the Offer. Board of Directors. Promptly upon the purchase of Shares by Parent or any of its Subsidiaries which represents at least a majority of the outstanding Shares, the Purchaser will be entitled to designate such number of directors, rounded up to the next whole number, on the Board of Directors of the Company as is equal to the number of directors which is the product of (i) the total number of directors on the Board (giving effect to the directors designated by the Purchaser pursuant to this sentence) multiplied by (ii) the percentage that the number of Shares so accepted for payment bears to the total number of Shares then outstanding. In furtherance thereof, the Company will, upon request of the Purchaser, use its best reasonable efforts promptly either to increase the size of its Board or secure the resignations of such number of its incumbent directors, or both, as is necessary to enable the Purchaser's designees to be so elected to the Board, and shall take all 19 22 actions available to the Company to cause the Purchaser's designees to be so elected. At such time, the Company will, if requested by the Purchaser, also cause persons designated by the Purchaser to constitute at least the same percentage (rounded up to the next whole number) as is on the Board of each committee of the Board. Notwithstanding the foregoing, the Company shall have at least one independent director until the Effective Time. In the Merger Agreement, the Company has agreed to 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 the Merger Agreement, including mailing to shareholders the information required by such Section 14(f) and Rule 14f-1 as is necessary to enable the Purchaser's designees to be elected to the Board. The Purchaser or Parent will supply the Company and be solely responsible for any information with respect to either of them and their nominees, officers, directors and affiliates required by such Section 14(f) and Rule 14f-1. The Merger. The Merger Agreement provides that, subject to the terms and conditions thereof and in accordance with the MBCA, at the Effective Time, the Purchaser will be merged with and into the Company. Following the Merger, the separate corporate existence of the Purchaser will cease and the Company will continue as the surviving corporation (the "Surviving Corporation"). The Merger shall be effected by the filing at the time of Closing of properly executed Articles of Merger or other appropriate documents with the Secretary of State of the State of Minnesota. The Merger Agreement provides that, at the Effective Time, by virtue of the Merger and without any action on the part of Parent, the Purchaser, the Company or the holders thereof the Shares will be converted into the right to receive the Offer Price in cash, without interest thereon, as soon as is reasonably practicable upon surrender of the certificate formerly representing such Shares (other than any Shares in the treasury of the Company, which Shares, by virtue of the Merger and without any action on the part of the holder thereof, shall be cancelled and retired and shall cease to exist with no payment being made with respect thereto, and other than Dissenting Shares). At the Effective Time, each share of common stock, par value $.01 per share, of the Purchaser issued and outstanding immediately prior to the Effective Time will, by virtue of the Merger and without any action on the part of the holder thereof, be converted into and become one validly issued, fully paid and nonassessable share of common stock, par value $.01 per share, of the Surviving Corporation. The Merger Agreement provides that the Articles of Incorporation of the Purchaser, as in effect immediately prior to the Effective Time, will be the Articles of Incorporation of the Surviving Corporation, until thereafter amended in accordance with the provisions thereof and the MBCA. The By-Laws of the Purchaser in effect at the Effective Time will be the By-Laws of the Surviving Corporation, until thereafter amended in accordance with the provisions thereof and the MBCA. Vote Required to Approve the Merger. Pursuant to the Merger Agreement, the Company will, if required by applicable law in order to consummate the Merger, duly call, give notice of, convene and hold a special meeting of its shareholders (the "Special Meeting") as soon as practicable following the acceptance for payment and purchase of Shares by Parent or its affiliates pursuant to the Offer for the purpose of considering and taking action upon the Merger Agreement. The Merger Agreement provides that the Company will, if required by applicable law in order to consummate the Merger, prepare and file with the Commission a definitive proxy statement (the "Proxy Statement") relating to the Merger and the Merger Agreement and cause such Proxy Statement to be mailed to its shareholders, provided that no amendment or supplement to the Proxy Statement will be made by the Company without consultation with Parent and its counsel. If the Purchaser acquires at least a majority of the outstanding Shares, the Purchaser will have sufficient voting power to approve the Merger, even if no other shareholder votes in favor of the Merger. The Merger Agreement provides that in the event that Parent, the Purchaser or any other subsidiary of Parent acquires at least 90% of the outstanding Shares pursuant to the Offer, the Tender Agreements or otherwise, the Purchaser and the Company will take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after such acquisition, without a meeting of shareholders of the Company, in accordance with the MBCA. Conditions to the Merger. The respective obligations of Parent, the Purchaser and the Company to consummate the Merger and the transactions contemplated thereby are subject to the satisfaction, at or before 20 23 the Effective Time, of certain conditions, including: (i) if required by the MBCA, the shareholders of the Company shall have duly approved the transactions contemplated by the Merger Agreement; (ii) the consummation of the Merger shall not be restrained, enjoined or prohibited by any order, judgment, decree, injunction or ruling of a court of competent jurisdiction or any Governmental Entity and there shall not have been any statute, rule or regulation enacted, promulgated or deemed applicable to the Merger by any Governmental Entity which prevents the consummation of the Merger; and (iii) Parent and/or the Purchaser shall have purchased all Shares validly tendered and not withdrawn pursuant to the Offer (however, this condition is not applicable to the obligations of Parent or the Purchaser if Parent and/or the Purchaser fails to purchase Shares tendered pursuant to the Offer in violation of the terms of the Merger Agreement or the Offer). Representations and Warranties. The Merger Agreement contains various representations and warranties of the parties thereto, including representations by the Company as to, among other things, (i) organization, qualification, charter and bylaws; (ii) capitalization; (iii) enforceability, authorization of the Company relative to the Merger Agreement and the transactions contemplated thereby; (iv) no violation or conflict of the Merger Agreement and the transactions contemplated thereby with the Company's organizational documents, certain contracts and applicable law; (v) title to assets; (vi) litigation; (vii) accounting records; (viii) company financial statements; (ix) absence of certain changes; (x) buildings and equipment; (xi) performance of contracts; (xii) employee benefit plans; (xiii) brokers; (xiv) taxes; (xv) real estate; (xvi) governmental approvals; (xvii) no pending acquisitions; (xviii) labor matters; (xix) existing permits and violations of law; (xx) intangible assets; (xxi) customers and suppliers; (xxii) environmental protection; (xxiii) vote required; (xxiv) returns; (xxv) SEC reports; (xxvi) content of proxy statement; (xxvii) opinion of financial advisor; (xxviii) certain agreements; and (xxix) the Rights Agreement. Covenants. The Merger Agreement contains various covenants of the parties thereto, including covenants as to, among other things, the conduct of the business of the Company, as described in further detail below, during the period from the date of the Merger Agreement to the Closing Date or termination of the Merger Agreement. Interim Covenants. Pursuant to the Merger Agreement, the Company has agreed that during the period from the date of the Merger Agreement to the Closing Date or termination of the Merger Agreement, the Company will (a) carry on its business in the usual, regular and ordinary course substantially in the same manner as heretofore carried on; (b) not (i) make payments or distributions (other than normal salaries) to any Affiliate of the Company except for transactions in the ordinary course of business upon commercially reasonable terms; (ii) sell, lease, transfer or assign any of its assets, tangible or intangible, other than for a fair consideration in the ordinary course of business and other than the disposition of obsolete or unusable property; (iii) enter into any Contract (other than purchase and sales orders in the ordinary course of business in accordance with past practice) involving either more than $50,000 or outside the ordinary course of business without the consent of the Parent (which consent shall not be unreasonably withheld); (iv) accelerate, terminate, modify in any material respect, or cancel any Contract (other than purchase and sales orders in the ordinary course of business in accordance with past practice) involving more than $50,000 to which the Company is a party or by which any of them is bound without the consent of the Parent (which consent shall not be unreasonably withheld); (v) make any capital expenditure (or series of related capital expenditures) involving either more than $50,000 (unless such expenditure is identified in the current business plan of the Company as disclosed to Parent) or outside the ordinary course of business; (vi) delay or postpone the payment of accounts payable and other liabilities outside the ordinary course of business; (vii) cancel, compromise, waive or release any right or claim (or series of related rights and claims) not covered by the reserves or accruals relating to such claim in the Company Financial Statements either involving more than $50,000 or outside the ordinary course of business without the consent of the Parent (which consent shall not be unreasonably withheld); (viii) grant any license or sublicense of any rights under or with respect to any Intangible Assets; or (ix) make any loan to, or enter into any other transaction with, any of its Affiliates, directors, officers and employees outside the ordinary course of business; (c) use, operate, maintain and repair all of its assets and properties in a normal business manner consistent with its past practices; (d) use commercially reasonable efforts to preserve in all material respects its business organization intact, to retain 21 24 the services of the Employees and to conduct business with suppliers, customers, creditors and others having business relationships with the Company in the best interests of the Company; (e) not knowingly do any act or knowingly omit to do any act or, to the extent within the Company's reasonable control, knowingly permit any act or omission to act, which will cause a breach of any of the Contracts that would have a Material Adverse Effect; (f) use reasonable efforts to maintain all of the Existing Insurance Policies (or policies substantially equivalent thereto) in full force and effect; (g) not (i) except as required by any Contract or in a manner consistent with past practice, grant any increase in the rate of pay of any of the Employees; (ii) institute or amend any Employee Benefit Plan unless required by Law; (iii) enter into or modify any written employment agreement with any Person; or (iv) pay or accrue any bonus or incentive compensation to any Person; (h) other than in the ordinary course of business, not create, incur or assume any Indebtedness or make any Investment; (i) not amend the Company Charter Documents; (j) not (i) issue any additional shares of stock of any class (except pursuant to the Existing Options) or grant any warrants, options or rights to subscribe for or acquire any additional shares of stock of any class; (ii) declare or pay any dividend or make any capital, surplus or other distributions (other than normal salaries) of any nature to the Shareholders; or (iii) directly or indirectly redeem, purchase or otherwise acquire, recapitalize or reclassify any of its capital stock or liquidate in whole or in part; (k) timely and properly file, or timely and properly file requests for extensions to file, all federal, state, local and foreign tax returns which are required to be filed, and pay or make provision for the payment of all taxes owed by it; and (l) not knowingly do any act or omit to do any act that would result in a breach of any representation by the Company set forth in the Merger Agreement. No Solicitations. Prior to the Effective Time, the Company has agreed that neither it, any of its Affiliates, nor any of the respective directors, officers, employees, agents or representatives of the foregoing, will, directly or indirectly, (i) solicit, initiate, facilitate or encourage (including by way of furnishing or disclosing non-public information) any inquiries or the making of any proposal with respect to any merger, consolidation or other business combination involving the Company or the acquisition of all or any significant part of the assets or capital stock of the Company (an "Acquisition Transaction") or (ii) negotiate, explore or otherwise engage in discussions with any Person (other than the Parent and its representatives) with respect to any Acquisition Transaction, or which may reasonably be expected to lead to a proposal for an Acquisition Transaction or enter into any agreement, arrangement or understanding with respect to any such Acquisition Transaction or which would require it to abandon, terminate or fail to consummate the Merger or any other transaction contemplated by the Merger Agreement; provided, however, that the Company may, in response to an unsolicited written proposal from a third party regarding a Superior Proposal (as hereinafter defined), furnish information to and engage in discussions and negotiations with such third party, but only if the Board of Directors of the Company determines in good faith, after consultation with its financial advisors and based upon the advice of outside independent counsel, that failing to take such action would result in a breach of the fiduciary duties of such Board of Directors under applicable Law. Without limitation of the Company's obligations, any violation of the foregoing restrictions by any director, officer, Affiliate, investment banker, financial advisor, attorney or other advisor or representative of the Company, whether or not such Person is purporting to act on behalf of the Company, or otherwise, shall be deemed to be a breach of Section 3.4 of the Merger Agreement by the Company. The Company has agreed that, as of March 23, 1998, it, its Affiliates, and the respective directors, officers, employees, agents and representatives of the foregoing, shall immediately cease and cause to be terminated any existing activities, discussions or negotiations with any Person (other than the Parent and its representatives) conducted heretofore with respect to any Acquisition Transaction. The Company has agreed to promptly advise the Parent in writing of the existence of (x) any inquiries or proposals (or desire to make a proposal) received by (or indicated to) after the date hereof, any such information requested from, or any negotiations or discussions sought to be initiated or continued with, the Company, its Affiliates, or any of the respective directors, officers, employees, agents or representatives of the foregoing, in each case from a Person (other than the Parent and its representatives) with respect to an Acquisition Transaction, and (y) the terms thereof, including the identity of such third party and the terms of any financing arrangement or commitment in connection with such Acquisition Transaction, and to update on an ongoing basis or upon the Parent's reasonable request, the status thereof. As used herein, "Superior Proposal" means a bona fide, written and unsolicited proposal or offer made by any Person (or group) (other than the Parent or any of its Subsidiaries) 22 25 with respect to an Acquisition Transaction on terms which, as determined by the Board of Directors of the Company in good faith and in the exercise of reasonable judgment (based on the advice of independent financial advisors and Katten Muchin & Zavis or outside independent Minnesota counsel), would reasonably be likely to be more favorable to the Company and its Shareholders than the transactions contemplated hereby. Termination; Termination Fees. The Merger Agreement may be terminated and the transactions contemplated thereby may be abandoned at any time prior to the Closing (whether before or after the approval of the Merger Agreement by the shareholders), as follows: (a) by mutual written agreement of the Parent and the Company; (b) by either of the Company or Parent: (i) if (x) the Offer shall have expired without any Shares being purchased therein or (y) the Purchaser shall not have accepted for payment all Shares tendered pursuant to the Offer by September 30, 1998; provided, however, that the right to terminate the Merger Agreement under these provisions shall not be available to any party whose failure to fulfill any obligation under the Merger Agreement has been the cause of, or resulted in, the failure of Parent or the Purchaser, as the case may be, 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: (i) if Parent, the Purchaser or any of their affiliates shall have failed to commence the Offer on or prior to five business days following the date of the initial public announcement of the Offer; provided, that the Company may not terminate the Merger Agreement pursuant to this clause of the Merger Agreement if the Company is at such time in breach of its obligations under the Merger Agreement; (ii) in connection with entering into a definitive agreement in connection with an Acquisition Transaction, provided it has complied with all provisions thereof, including the notice provisions therein, and that it makes simultaneous payment of the termination fee payment referred to below, plus any amounts then due as reimbursement of expenses; or (iii) 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 30 days after the giving of written notice to Parent or the Purchaser, as applicable; (d) by Parent: (i) if, due to an occurrence, not involving a breach by Parent or the Purchaser of their obligations hereunder, which makes it impossible to satisfy any of the conditions set forth in Annex A the Merger Agreement (which are set forth in Section 14 below), Parent, the Purchaser, or any of their affiliates shall have failed to commence the Offer on or prior to five business days following the date of the initial public announcement of the Offer; (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 (A) would give rise to the failure of a condition set forth in paragraph (f) or (g) of Annex A the Merger Agreement (which are set forth in paragraphs (f) and (g) of Section 14 below) and (B) cannot be or has not been cured, in all material respects, within 30 days after the giving of written notice to the Company; or (iii) if either Parent or the Purchaser is entitled to terminate the Offer as a result of the occurrence of any event set forth in paragraph (e) of Annex A to the Merger Agreement (which are set forth in paragraph (e) of Section 14 below). Notwithstanding any provision to the contrary contained in the Merger Agreement, the Company will immediately pay to the Parent (x) the amount of $2,500,000 and (y) all reasonably documented out-of-pocket expenses reasonably incurred by the Parent and the Purchaser in connection with the Merger Agreement and the Merger in an amount not to exceed $600,000 if the Merger Agreement is terminated: (1) by the Company pursuant to clause (c)(ii) above, (2) by the Parent pursuant to clause (d)(iii) above, (3) by Parent pursuant to clause (d)(ii) above if the breach thereof is due to the Company's intentional or bad faith acts, or (4) by either the Company or Parent pursuant to clause (b)(i) above and (a) prior thereto there shall have been publicly announced another Acquisition Transaction or an event set forth in paragraph (h) of Annex A to the Merger Agreement (which is set forth in paragraph (h) of Section 14 below) shall have occurred and (b) an Acquisition Transaction shall be consummated on or prior to March 31, 1999. The amount in (x) above shall be paid concurrently with any such termination and the amount in (y) above shall be paid within five (5) business days after receipt by the Company of reasonably detailed evidence of the same. Upon receipt of such payments, the Parent shall not be entitled to and shall 23 26 waive the right to seek damages or other amounts or remedies from the Company for breach of, or otherwise in connection with, the Merger Agreement. Stock Options and Warrants. The Merger Agreement provides that the Company will not issue any additional Options and, as of the Effective Time, each Existing Option which is outstanding at the Effective Time will be exchanged for, and the holders of each such Existing Option will be entitled to receive at the Closing (or thereafter, if necessary) upon surrender of such Existing Option for cancellation, cash equal to (i) the product of (a) the difference between the Offer Price and the exercise price of each such Existing Option, times (b) the number of Shares covered by such Existing Option. It is presently anticipated by the Company that the payment to be made at the Closing to the Option holders in respect of the Existing Options will be approximately $6.6 million (before any income taxes and other required withholdings). The Company will take all actions necessary to ensure that, from and after the Effective Time, the Surviving Corporation will not be bound by any options, warrants, rights or agreements which would entitle any person, other than Parent or the Purchaser, to beneficially own shares of Surviving Corporation or Parent or receive any payments (other than as set forth in the preceding paragraph hereof) in respect of such options, warrants, rights or agreements. The Company will take all actions necessary to terminate each plan with respect to Existing Options as of the Effective Time. Indemnification; Directors' and Officers' Insurance. Subsequent to the Effective Time, the Purchaser shall cause the Surviving Corporation to, and the Surviving Corporation and Parent, jointly and severally, shall, indemnify and hold harmless each present and former director and officer of the Company (collectively, the "Indemnified Parties") against all losses in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to any action or omission in their capacity as director or officer occurring before the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, for a period of six years after the Closing Date, in each case to the fullest extent permitted under applicable Law (and shall pay any expenses in advance of the final disposition of such action or proceeding to each Indemnified Party to the fullest extent permitted under applicable Law, upon receipt from the Indemnified Party to whom expenses are advanced of an undertaking to repay such advances as required under applicable Law); provided, however, that, if any claim for indemnification is asserted or made within such six year period, all rights to indemnification in respect of such claim shall continue until the disposition of such claim. Until the Effective Time, the Company shall keep in effect Article 7 of its Articles of Incorporation and Article 5 of its Bylaws, and thereafter for a period of four years the Surviving Corporation shall keep in effect in its Articles of Incorporation and Bylaws provisions which provide for indemnification exculpation to the extent provided for in Article 7 and Article 5 of the Articles of Incorporation and Bylaws, respectively. Parent and the Purchaser will cause to be maintained in effect for not less than four years after the Effective Time the current policies, or substantially similar policies, of directors' and officers' liability insurance maintained by the Company with respect to matters existing or occurring at or prior to the Effective Time; provided, however, that Parent and the Purchaser shall not be required to expend an amount greater than 150% of the annual premium of the current policy. TENDER AGREEMENTS The following is a summary of the material terms of the Tender Agreements. This summary is qualified in its entirety by reference to the Tender Agreements, each of which is incorporated herein by reference and a form of which has been filed with the Commission as an exhibit to the Schedule 14D-1. The Tender Agreements may be examined and a copy of each may be obtained at the place and in the manner set forth in Section 9 of this Offer to Purchase. Tender of Shares. On the terms and subject to the conditions set forth in the Tender Agreements, each of the Executive Shareholders will (i) tender the Shares owned by him (other than certain Shares pledged to a financial institution, which Shares will be tendered as soon as practicable) into the Offer promptly, and in any event no later than the fifth business day following the commencement of the Offer, or, if the Shareholder has not received the offer documents by such time, within two business days following receipt of such 24 27 documents, and (ii) not withdraw any Shares so tendered (except in the event the Stock Option (as defined herein) is exercised). The Executive Shareholders will receive the same price per Share received by other shareholders of the Company in the Offer with respect to Shares tendered by them in the Offer. Grant of Stock Option. On the terms and subject to the conditions set forth in the Tender Agreements, each Executive Shareholder has granted to Parent an irrevocable option (the "Stock Option") to purchase the Shares owned by such Executive Shareholder at a price per Share equal to the Offer Price, exercisable at any time, in whole only, if on or after March 23, 1998: (i) any corporation, partnership, individual, trust, unincorporated association, or other entity or "person" (as defined in Section 13(d)(3) of the Exchange Act) other than Parent or any of its "affiliates" (as defined in the Exchange Act) (a "Third Party"), will have (A) commenced or announced an intention to commence a bona fide tender offer or exchange offer for any shares of Common Stock, the consummation of which would result in "beneficial ownership" (as defined in the Exchange Act) by such Third Party (together with all such Third Party's affiliates and "associates" (as defined in the Exchange Act)) of 50% or more of the then outstanding voting equity of the Company (either on a primary or a fully diluted basis), (B) acquired beneficial ownership of shares of Common Stock that, when aggregated with any shares of Common Stock already owned by such Third Party, its affiliates and associates, would result in the aggregate beneficial ownership by such Third Party, its affiliates and associates of 15% or more of the then outstanding voting equity of the Company (either on a primary or a fully diluted basis); provided, however, that "Third Party" for purposes of this clause (B) does not include any corporation, partnership, person, other entity or group that beneficially owns more than 15% of the outstanding voting equity of the Company (either on a primary or a fully diluted basis) as of the date hereof and that does not, after the date hereof, increase such ownership percentage by more than an additional 1% of the outstanding voting equity of the Company (either on a primary or a fully diluted basis), (C) acquired assets constituting 15% or more of the total assets or earning power of the Company taken as a whole or (D) entered into an agreement with the Company that contemplates the acquisition of (1) assets constituting 15% or more of the total assets or earning power of the Company taken as a whole or (2) beneficial ownership of 15% or more of the outstanding voting equity of the Company; or (ii) any of the events described in Section 9.1(c)(ii) or 9.1(d)(iii) of the Merger Agreement that would allow the Company or Parent to terminate the Merger Agreement has occurred (after the passage of any time periods set forth in such sections but without the necessity of the Company or Parent having terminated the Merger Agreement). Conditions to Closing. The Executive Shareholders' obligations to sell the Shares owned by them upon exercise of the Stock Option and such shareholders' obligations under the provisions described in the following paragraph are subject (at the Executive Shareholder's election) to the further conditions that there will have been no material breach of the representations, warranties, covenants or agreements of Parent or the Purchaser contained in the applicable Tender Agreement or contained in the Merger Agreement, which breach has not been cured within ten business days of the receipt of written notice thereof from the Executive Shareholder. Voting Agreement; Proxy. Pursuant to the Tender Agreements, each of the Executive Stockholders agreed that, so long as such Agreements are in effect, at any meeting (whether annual or special and whether or not an adjourned or postponed meeting) of the holders of Common Stock, however called, or in connection with any written consent of the holders of Common Stock, such Executive Shareholder will appear at the meeting or otherwise cause the Shares owned by such Executive Shareholder to be counted as present thereat for purposes of establishing a quorum and vote or consent (or cause to be voted or consented) such Shares (i) in favor of the Merger and (ii) against any action or agreement that 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 and (iii) if requested by Parent, in favor of a shareholder resolution proposed by Parent in accordance with applicable provisions of the MBCA the purpose of which is to cause the Offer and the Merger to be consummated and which does not relate to the election of directors. Each of the Executive Shareholders irrevocably granted to, and appointed, Parent and any nominee thereof, his proxy and attorney-in-fact (with full power of substitution) during the term of the applicable Tender Agreement, for and in the name, place and stead of such Executive Shareholder, to vote the Shares 25 28 owned by such Executive Shareholder, or grant a consent or approval in respect of such Shares, in connection with any meeting of the shareholders of the Company (i) in favor of the Merger and (ii) against any action or agreement that 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. Such proxy and power of attorney irrevocable and coupled with an interest and is intended to be irrevocable in accordance with the provisions of Section 302A.449(2) of the MBCA. Pursuant to the applicable Tender Agreement, each Executive Shareholder also represented that all proxies theretofore given by such Executive Shareholder in respect of the Shares, if any, are not irrevocable, and revoked all such proxies given with respect to the Shares. Certain Representations and Warranties. In connection with the Tender Agreements, the Executive Shareholders each made certain customary representations and warranties, including with respect to (i) ownership of the Shares and the absence of encumbrances on and in respect of the Executive Shareholder's Shares, (ii) the Executive Shareholder's authority to enter into and perform its obligations under the applicable Tender Agreement, (iii) the absence of conflicts and requisite governmental consents and approvals, and (iv) the absence of any broker, finder or investment banker relationship with respect to the transactions contemplated by the applicable Tender Agreement except for the engagement of Wasserstein Perella & Co., Inc. by the Company. In connection with the Tender Agreements, each of Parent and the Purchaser made certain customary representations and warranties to the Executive Shareholders, including with respect to (i) authority to enter into and perform its obligations under the applicable Tender Agreement, (ii) absence of conflicts and requisite governmental consents and approvals, and (iii) the absence of any broker, finder of investment banker relationship with respect to the transactions contemplated by the Tender Agreements. Certain Covenants. Pursuant to the Tender Agreements, each Executive Shareholder covenanted and agreed that, except as contemplated by such Agreement and except pursuant to the Offer, the Executive Shareholder will not offer to sell, sell, pledge or otherwise dispose of or transfer any interest in or encumber with any lien any of the Shares owned by such Executive Shareholder, and will not (i) enter into any contract, option or other agreement or understanding with respect to any transfer of any or all of such Shares or any interest therein, (ii) grant any proxy, power-of-attorney or other authorization or consent in or with respect to such Shares, (iii) deposit such Shares into a voting trust or enter into a voting agreement or arrangement with respect to such Shares or (iv) take any other action with respect to such Shares that would in any way restrict, limit or interfere with the performance of the Executive Shareholder's obligations under the applicable Tender Agreement. Pursuant to the Tender Agreements, each Executive Shareholder also agreed that he will notify Parent immediately if any proposals are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued with the Executive Shareholder or his attorneys, accountants or other agents (each of such actions, an "Interest"), in each case in connection with any Acquisition Transaction indicating, in connection with such notice, the name of the person indicating such Interest and the terms and conditions of any related proposals or offers. The Executive Shareholders also agreed to cease immediately and cause to be terminated immediately any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Transaction. In addition, each Executive Shareholder agreed to keep Parent informed, on a current basis, of the status and terms of any Acquisition Transaction and to use his best efforts to ensure that his attorneys, accountants and other agents do not, directly or indirectly: (i) initiate, solicit or encourage, or take any action to facilitate the making of, any offer or proposal that constitutes or is reasonably likely to lead to any Acquisition Transaction, (ii) enter into any agreement with respect to any Acquisition Transaction or (iii) in the event of an unsolicited written proposal in respect of a Acquisition Transaction, engage in negotiations or discussions with, or provide any information or data to, any person (other than Parent, any of its affiliates or representatives and except for information that has been previously publicly disseminated by the Company) relating to any Acquisition Transaction. Termination. Except as otherwise specifically provided therein, all obligations under the Tender Agreements terminate on the earliest of (a) the date the Merger Agreement is terminated in accordance with its terms or the date the Offer is terminated by Parent or the Purchaser as a result of any failure of a condition 26 29 of the Offer; provided, however, that the provisions relating to the Stock Option shall not terminate until 60 days thereafter (or such later time as permitted by such provisions if the Merger Agreement was terminated pursuant to Section 9.1(c)(ii) or 9.1(d)(iii) thereof), (b) the purchase of all the Shares subject to the Stock Option pursuant to the Offer or pursuant to the Stock Option, or (c) on September 30, 1998. 12. PURPOSE OF THE OFFER AND THE MERGER; PLANS FOR THE COMPANY; OTHER MATTERS The purpose of the Offer, the Merger, the Merger Agreement and the Tender Agreements is for Parent to acquire control of, and the entire equity interest in, the Company. Upon consummation of the Merger, the Company will become an indirect wholly-owned subsidiary of Parent. The Offer is intended to increase the likelihood that the Merger will be effected. Plans for the Company Parent is conducting a detailed review of the Company and its assets, corporate structure, capitalization, operations, properties, policies, management and personnel and will consider, subject to the terms of the Merger Agreement, what, if any, changes would be desirable in light of the circumstances which exist upon completion of the Offer. Such changes could include changes in the Company's business, corporate structure, charter, bylaws, capitalization, Board of Directors, management or dividend policy, although, except as noted in this Offer to Purchase, Parent has no current plans with respect to any of such matters. Except as described in this Offer to Purchase, neither Parent nor the Purchaser has any present plans or proposals that would result in an extraordinary corporate transaction, such as a merger, reorganization, liquidation, relocation of operations, or sale or transfer of assets, involving the Company or any material changes in the Company's corporate structure, business or composition of its management or personnel. Other Matters Shareholder Approval. Under the MBCA and the Company's Articles of Incorporation, the approval of the Board of Directors of the Company, and the affirmative vote of the holders of a majority of the outstanding Shares, including the Shares held by Purchaser and its affiliates, are required to approve and adopt the Merger Agreement and the transactions contemplated thereby, including the Merger. The Company's Board of Directors and a disinterested committee of the Board of Directors have each unanimously approved the Offer, the Merger and the Merger Agreement and the transactions contemplated thereby. Unless the Merger is consummated pursuant to the short-form merger provisions under the MBCA described below (in which case no further corporate action by the shareholders of the Company will be required to complete the Merger), the only remaining required corporate action of the Company will be the approval and adoption of the Merger Agreement and the transactions contemplated thereby by the affirmative vote of the holders of a majority of the Shares. Short Form Merger. Under Sections 302A.621 and 302A.641 of the MBCA, if the Purchaser acquires at least 90% of the outstanding Shares, the Purchaser will be able to approve the Merger without a vote of the Company's shareholders. In such event, the Purchaser anticipates that it will take all necessary and appropriate action to cause the Merger to become effective as soon as reasonably practicable after such acquisition without a meeting of the Company's shareholders. If the Purchaser does not acquire at least 90% of the outstanding Shares pursuant to the Offer or otherwise, a significantly longer period of time may be required to effect the Merger, because a vote or the consent of the Company's shareholders would be required under the MBCA. Pursuant to the Merger Agreement, the Company has agreed to take all action necessary under the MBCA and its Articles of Incorporation and Bylaws to convene a meeting of its shareholders promptly following consummation of the Offer to consider and vote on the Merger, if a shareholders' vote is required. If the Purchaser owns a majority of the outstanding Shares, approval of the Merger can be obtained without the affirmative vote of any other shareholder of the Company. 27 30 Appraisal Rights. No appraisal rights are available in connection with the Offer. However, if the Merger is consummated, shareholders of the Company at the time of the Merger will have certain rights under Sections 302A.471 and 302A.473 of the MBCA to dissent and demand appraisal of, and to receive payment in cash of the fair value of, their Shares. Such rights to dissent, if the statutory procedures are complied with, could lead to a judicial determination of the fair value of the Shares (excluding any element of value arising from the accomplishment or expectation of the Merger) required to be paid in cash to such dissenting holders for their Shares. Any such determination could be based upon considerations other than, or in addition to, the market value of the Shares, including, among other things, asset values and earning capacity of the Company. Therefore, the value so determined in any appraisal proceeding could be different from the price being paid in the Offer. If any holder of Shares who demands appraisal under Sections 302A.471 and 302A.473 of the MBCA fails to perfect, or effectively withdraws or loses his right to appraisal, as provided in the MBCA, the Shares of such holder will be converted into the Merger Consideration in accordance with the Merger Agreement. A shareholder may withdraw his demand for appraisal by delivery to Parent of a written withdrawal of his demand for appraisal and acceptance of the Merger. Failure to follow the steps required by Sections 302A.471 and 302A.473 of the MBCA for perfecting appraisal rights may result in the loss of such rights. Rule 13e-3. The Merger would have to comply with any applicable federal law operative at the time. Rule 13e-3 under the Exchange Act is applicable to certain "going private" transactions. The Purchaser does not believe that Rule 13e-3 will be applicable to the Merger. Rule 13e-3 requires, among other things, that certain financial information concerning the Company, and certain information relating to the fairness of the proposed transaction and the consideration offered to minority shareholders in such a transaction, be filed with the Commission and disclosed to minority shareholders prior to consummation of the transaction. 13. DIVIDENDS AND DISTRIBUTIONS. As described above, the Merger Agreement provides that, prior to the purchase of Shares by Purchaser pursuant to the Offer, without the prior written consent of Parent, the Company will not (i) issue any additional shares of stock of any class (except pursuant to the Existing Options) or grant any warrants, options or rights to subscribe for or acquire any additional shares of stock of any class; (ii) declare or pay any dividend or make any capital, surplus or other distributions (other than normal salaries) of any nature to the Shareholders; or (iii) directly or indirectly redeem, purchase or otherwise acquire, recapitalize or reclassify any of its capital stock or liquidate in whole or in part. 14. CONDITIONS OF THE OFFER. Notwithstanding any other provisions of the Offer, and in addition to (and not in limitation of) the Purchaser's right to extend and amend the Offer at any time in its sole discretion (subject to the provisions of the Merger Agreement), Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), 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 Condition has not been satisfied, or (iii) at any time on or after the date of the Merger Agreement and before the time of acceptance for payment for any such Shares, any of the following events shall have occurred: (a) there shall be threatened or pending any suit, action or proceeding by any Governmental Entity against the Purchaser, Parent or the Company (i) seeking to prohibit or impose any material limitations on Parent's or the Purchaser's ownership or operation (or that of Parent's 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 Parent's Subsidiaries and affiliates to dispose of or hold separate any material portion of the business or assets of the Company or Parent and Parent's Subsidiaries, in each case taken as a whole, (ii) challenging the acquisition by Parent or the Purchaser of any Shares under the Offer, seeking to restrain or prohibit 28 31 the making or consummation of the Offer or the Merger or the performance of any of the other transactions contemplated by the Agreement, or seeking to obtain from the Company, Parent or the Purchaser any damages that are material in relation to the Company, (iii) seeking to impose material limitations on the ability of the Purchaser, or render the Purchaser unable, to accept for payment, pay for or purchase some or all of the Shares pursuant to the Offer and the Merger, (iv) seeking to impose material limitations on the ability of the Purchaser or Parent effectively to exercise full rights of ownership of the Shares, including, without limitation, the right to vote the Shares purchased by it on all matters properly presented to the Company's shareholders, or (v) which otherwise is reasonably likely to have a Material Adverse Effect (as defined in the Merger Agreement); (b) there shall be any statute, rule regulation, judgment, order or injunction enacted, entered, enforced, promulgated, on behalf of a Government Entity, to the Offer or the Merger, or any other action shall be taken by any Governmental Entity, other than the application to the Offer or the Merger of applicable waiting periods under HSR Act, 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; (c) there shall have occurred (i) any general suspension of trading in, or limitation on prices for, securities on the NYSE for a period in excess of 24 hours (excluding 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 governmental authority on the extension of credit generally by banks or other financial institutions, or (v) a change in general financial, bank or capital market conditions which materially and 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; (d) there shall have occurred any events after the date of the Agreement which, either individually or in the aggregate, would have a Material Adverse Effect; provided, however, that no event, change or effect that materially results from the transactions contemplated by the Merger Agreement, including the Offer and the Merger, or the announcement thereof shall be deemed to cause either individually or in the aggregate, a Material Adverse Effect; (e) (i) the Board of Directors of the Company shall have withdrawn or modified in a manner adverse to Parent or the Purchaser its approval or recommendation of the Offer, the Merger or the Merger Agreement, or approved or recommended any Acquisition Transaction or (ii) the Company shall have entered into any agreement with respect to any Superior Proposal in accordance with Section 3.4 of the Merger Agreement; (f) the representations and warranties of the Company set forth in the Merger Agreement shall not be true and correct, in each case (i) as of the date referred to in any representation or warranty which addresses matters as of a particular date, or (ii) as to all other representations and warranties, as of the date of the Merger Agreement and as of the scheduled expiration of the Offer, unless the inaccuracies (without giving effect to any materiality or material adverse effect qualifications or materiality exceptions contained therein) under such representations and warranties, taking all the inaccuracies under all such representations and warranties together in their entirety, do not, individually or in the aggregate, result in a Material Adverse Effect; (g) the Company shall have failed to perform any obligation or to comply with any agreement or covenant to be performed or compiled with by it under the Merger Agreement other than any failure which would not have, either individually or in the aggregate, a Material Adverse Effect; (h) any person acquires beneficial ownership (as defined in Rule 13d-3 promulgated under the Exchange Act) of at least 15% of the outstanding Shares (other than any person not required to file a Schedule 13D under the rules promulgated under the Exchange Act); or 29 32 (i) the Merger Agreement shall have been terminated in accordance with its terms. The foregoing conditions are for the sole benefit of Parent and the Purchaser, may be asserted by Parent or the Purchaser regardless of the circumstances giving rise to such condition (including any action or inaction by Parent or the Purchaser not in violation of the Merger Agreement) and 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, subject in each case to the terms of the Merger Agreement. 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 from time to time. 15. CERTAIN LEGAL MATTERS. Except as described in this Section 15, based on information provided by the Company, none of the Company, the Purchaser or Parent is aware of any license or regulatory permit that appears to be material to the business of the Company and its subsidiaries, taken as a whole, that might be adversely affected by the Purchaser's acquisition of Shares as contemplated herein or of any approval or other action by a domestic or foreign governmental, administrative or regulatory agency or authority that would be required or desirable for the acquisition and ownership of the Shares by the Purchaser as contemplated herein. Should any such approval or other action be required or desirable, the Purchaser and Parent presently contemplate that such approval or other action will be sought, except as described below under "State Takeover Laws." While, except as otherwise described in this Offer to Purchase, the Purchaser does not presently intend to delay the acceptance for payment of or payment for 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 failure to obtain any such approval or other action might not result in consequences adverse to the Company's business or that certain parts of the Company's business might not have to be disposed of or other substantial conditions complied with in the event that such approvals were not obtained or such other actions were not taken or in order to obtain any such approval or other action. If certain types of adverse action are taken with respect to the matters discussed below, the Purchaser could decline to accept for payment or pay for any Shares tendered. See Section 14 for certain conditions to the Offer, including conditions with respect to governmental actions. (a) State Takeover Laws. The Company is incorporated under the laws of the State of Minnesota. No Minnesota takeover statute or similar statute or regulation, including without limitation Sections 302A.671 to 302A.675 of the MBCA, imposes restrictions materially adversely affecting (or materially delaying) the consummation of the Offer or the Merger or would, as a result of the Offer, the Merger, the transactions contemplated thereby or the acquisition of securities of the Company or the Surviving Corporation by Parent or the Purchaser, (A) restrict or impair the ability of Parent to vote, or otherwise to exercise the rights of a shareholder with respect to, securities of the Company or the Surviving Corporation that may be acquired or controlled by Parent or (B) entitle any shareholder to acquire securities of the Company or the Surviving Corporation on a basis not available to Parent. However, see the discussion of the Minnesota Takeover Disclosure Law, below. A number of other states throughout the United States have enacted takeover statutes that purport, in varying degrees, to be applicable to attempts to acquire securities of corporations that are incorporated or have assets, shareholders, executive offices or places of business in such states. In Edgar v. MITE Corp., the Supreme Court of the United Sates held that the Illinois Business Takeover Act, which involved state securities laws that made the takeover of certain corporations more difficult, imposed a substantial burden on interstate commerce and therefore was unconstitutional. In CTS Corp. v. Dynamics Corp. of America, however, the Supreme Court of the United States held that a state may, as a matter of corporate law and, in particular, with respect to those aspects of corporate law concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without prior approval of the remaining shareholders, provided that such laws were applicable only under certain conditions. Based on information supplied by the Company's representations in the Merger Agreement, the Purchaser does not believe that any state takeover statutes apply to the Offer or the Merger. Neither the 30 33 Purchaser nor Parent has currently complied with any state takeover statute or regulation. The Purchaser reserves the right to challenge the applicability or validity of any state law purportedly applicable to the Offer or the Merger and nothing in this Offer to Purchase or any action taken in connection with the Offer or the Merger is intended as a waiver of such right. If it is asserted that any state takeover statute is applicable to the Offer or the Merger and an appropriate court does not 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, and the Purchaser might be unable to accept for payment or pay for Shares tendered pursuant to the Offer, or be delayed in consummating the Offer or the Merger. In such case, the Purchaser may not be obligated to accept for payment or pay for any Shares tendered pursuant to the Offer. See Section 14. The Minnesota Takeover Disclosure Law, Minnesota Statutes Chapter 80B.01-80B.19 (the "Minnesota Statute"), by its terms requires certain disclosures and the filing of certain disclosure material with the Minnesota Commissioner of Commerce (the "Commissioner") with respect to any offer for a corporation, such as the Company, that has its principal place of business in Minnesota and a certain number of shareholders resident in Minnesota. Purchaser will file disclosure material with the Commissioner on March 26, 1998. Although the Commissioner does not approve such material, he does review it for the adequacy of such disclosure and is empowered to suspend summarily the Offer in Minnesota within three days of such filing if he determines that the material does not (or the materials provided beneficial owners of the Shares residing in Minnesota do not) provide full disclosure. If such summary suspension occurs, a hearing must be held (within 10 days of the summary suspension) and a determination made (within three days of the completion of such hearing, but not more than 16 days after the initial summary suspension) as to whether to permanently suspend the Offer in Minnesota, subject to corrective disclosure. If the Commissioner takes action under the Minnesota Statute, then the Purchaser may not be obligated to accept for payment or pay for Shares tendered pursuant to the Offer because such action may have the effect of significantly delaying the Offer. See Section 14 for certain conditions of the Offer, including conditions with respect to governmental actions. In such event, the Purchaser may, among other things, terminate the Offer or amend the terms and conditions of the Offer. (b) Antitrust. The Offer and the Merger are subject to the HSR Act, which provides that 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 Federal Trade Commission (the "FTC") and certain waiting period requirements have been satisfied. Parent and the Company expect to file their Notification and Report Forms with respect to the Offer under the HSR Act on or about March 30, 1998. The waiting period under the HSR Act with respect to the Offer will expire at 11:59 p.m., New York City time, on the 15th day after the date Parent's form is filed unless early termination of the waiting period is granted. However, the Antitrust Division or the FTC may extend the waiting period by requesting additional information or documentary material from Parent or the Company. If such a request is made, such waiting period will expire at 11:59 p.m., New York City time, on the tenth day after substantial compliance by Parent with such request. Only one extension of the waiting period pursuant to a request for additional information is authorized by the HSR Act. Thereafter, such waiting period may be extended only by court order or with the consent of Parent. In practice, complying with a request for additional information or material can take a significant amount of time. In addition, if the Antitrust Division or the FTC raises substantive issues in connection with a proposed transaction, the parties frequently engage in negotiations with the relevant governmental agency concerning possible means of addressing those issues and may agree to delay consummation of the transaction while such negotiations continue. The Purchaser will not accept for payment Shares tendered pursuant to the Offer unless and until the waiting period requirements imposed by the HSR Act with respect to the Offer have been satisfied. See Section 14. As discussed below, the HSR Act requirements with respect to the Merger will not apply if certain conditions are met. In particular, the Merger may not be consummated until 30 calendar days after receipt by the Antitrust Division and the FTC of the Notification and Report Forms of both Parent and the Company unless the Purchaser acquires 50% or more of the outstanding Shares pursuant to the Offer (which would be the case if the Minimum Condition were satisfied) or the 30-day period is earlier terminated by the Antitrust 31 34 Division and the FTC. Within such 30-day period, the Antitrust Division or the FTC may request additional information or documentary materials from Parent and/or the Company. The Merger may not be consummated until 20 days after such requests are substantially complied with by both Parent and the Company. Thereafter, the waiting periods may be extended only by court order or with the consent of Parent and the Company. The FTC and the Antitrust Division periodically review the legality under the antitrust laws of transactions such as the Purchaser's acquisition of Shares pursuant to the Offer and the Merger. At any time before or after the Purchaser's acquisition of Shares, the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the acquisition of Shares pursuant to the Offer or otherwise or seeking divestiture of Shares acquired by the Purchaser or divestiture of substantial assets of Parent or its subsidiaries. Private parties, as well as state governments, may also bring legal action under the antitrust laws under certain circumstances. Based upon an examination of publicly available information relating to the businesses in which Parent and the Company are engaged, Parent and the Purchaser believe that the acquisition of Shares by the Purchaser will not violate the antitrust laws. Nevertheless, there can be no assurance that a challenge to the Offer or other acquisition of Shares by the Purchaser on antitrust grounds will not be made or, if such a challenge is made, of the result. See Section 14 for certain conditions to the Offer, including conditions with respect to litigation and certain governmental actions. (c) Federal Reserve Board Regulations. Regulations G, U and X (the "Margin Regulations") of the Federal Reserve Board restrict the extension or maintenance of credit for the purpose of buying or carrying margin stock, including the Shares, if the credit is secured directly or indirectly by margin stock. Such secured credit may not be extended or maintained in an amount that exceeds the maximum loan value of all the direct and indirect collateral securing the credit, including margin stock and other collateral. All financing for the Offer will be in full compliance with the Margin Regulations. 16. FEES AND EXPENSES. The Purchaser has retained Innisfree M&A Incorporated to act as the Information Agent and Bankers Trust Company to act as the Depositary in connection with the Offer. Such firms each will receive reasonable and customary compensation for their services. The Purchaser has also agreed to reimburse each such firm for certain reasonable out-of-pocket expenses and to indemnify each such firm against certain liabilities and expenses in connection with their services, including certain liabilities under the federal securities laws. The Purchaser will not pay any fees or commissions to any broker or dealer or other person (other than the Information Agent) for soliciting tenders of Shares pursuant to the Offer. Brokers, dealers, banks and trust companies will be reimbursed by the Purchaser for customary mailing and handling expenses incurred by them in forwarding material to their customers. 17. MISCELLANEOUS. The Offer is being made to all holders of Shares other than the Company. The Purchaser is not aware of any jurisdiction in which the making of the Offer or the tender of Shares in connection therewith would not be in compliance with the laws of such jurisdiction. If the Purchaser becomes aware of any jurisdiction in which the making of the Offer would not be in compliance with applicable law, the Purchaser will make a good faith effort to comply with any such law. If, after such good faith effort, the Purchaser cannot comply with any such law, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares residing in 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 shall be deemed to be made on behalf of the Purchaser by one or more registered brokers or dealers licensed under the laws of 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. 32 35 The Purchaser and Parent have filed with the Commission the Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act furnishing certain additional information with respect to the Offer. The Schedule 14D-1 and any amendments thereto, including exhibits, may be examined and copies may be obtained from the offices of the Commission in the manner set forth in Section 8 of this Offer to Purchase (except that they will not be available at the regional offices of the Commission). PACKAGE ACQUISITION, INC. March 26, 1998 33 36 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER I. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The following table sets forth the name, business address and 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, each such person is a citizen of the United States of America and the business address of each such person is c/o Ivex Packaging Corporation, 100 Tri-State Drive, Lincolnshire, Illinois 60069. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to employment with Parent. Unless otherwise indicated, each such person has held his or her present occupation as set forth below, or has been an executive officer at Parent, or the organization indicated, for the past five years.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND NAME FIVE-YEAR EMPLOYMENT HISTORY ---- ---------------------------------------------- George V. Bayly................ Director, Chairman of the Board, President and Chief Executive Officer of Parent since January 1991. Frank V. Tannura............... Director of Parent since August 1995. Vice President and Chief Financial Officer of Parent since October 1989. Richard R. Cote................ Vice President and Treasurer of Parent since August 1994. Mr. Cote was Assistant Vice President and Treasurer of Parent from March 1992 to August 1994. Robert W. Crichton............. Vice President and General Manager of Parent since February 1998. From February 1997 to February 1998, Mr. Crichton was Vice President and General Manager of Parent's surface protection business and prior to 1997, President of Sonoco Products Company's Flexible Packaging Division. Thomas S. Ellsworth............ Vice President and General Manager of Parent since 1994. Mr. Ellsworth was Vice President of Parent's paper mill operations from 1992 to 1994. Robert W. George............... Vice President and General Manager of Parent since August 1996. From 1993 to 1996, Mr. George was President and Chief Executive Officer of Plastofilm Industries, Inc. and prior to 1993, President of Nitrobar Incorporated. Gene J. Gentili................ Vice President and General Manager of Parent since 1994. Vice President of Sales of Parent from 1993 to 1994. Mr. Gentili was director of national accounts for Parent from 1991 to 1993. Roger A. Kurinsky.............. Vice President and General Manager of Parent since 1994. Vice President of Marketing of Parent from 1991 to 1994. Jeremy S. Lawrence............. Vice President of Human Resources of Parent since May 1991. G. Douglas Patterson........... Vice President and General Counsel of Parent since June 1991. David E. Wartner............... Corporate Controller of Parent since 1994. Prior to 1994, Mr. Wartner was associated with Price Waterhouse LLP. Eugene M. Whitacre............. Vice President and General Manager of Parent since February 1991. Glenn R. August................ Director of Parent since March 1993 and a Managing Director of Oak Hill Partners, Inc. (Acadia's investment advisor) and its predecessor since 1987. Since August 1996, Mr. August has served as President of Oak Hill Advisors, Inc., the exclusive advisor to the Oak Hill Securities Fund, L.P., a $1.75 billion investment partnership.
I-1 37
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND NAME FIVE-YEAR EMPLOYMENT HISTORY ---- ---------------------------------------------- R. James Comeaux............... Director of Parent since December 1, 1997. President of Petrochemical Management Inc. since 1993 and President and Chief Executive Officer of Arcadian Corporation from 1989 to 1993. Mr. Comeaux is also a director of Energy BioSystems Corporation. Anthony P. Scotto.............. Director of Parent since August 1995. Managing Director of Oak Hill Partners, Inc. (Acadia's investment advisor) and its predecessor since March 1998. Mr. Scotto is also a director of Specialty Foods Corporation and Holophane Corporation. William J. White............... Director of Parent since December 1, 1997. Professor at Northwestern University since January 1998 and Chairman of the Board of Bell & Howell Company from February 1993 to December 1997 and of Bell & Howell Operating Company from February 1990 to December 1997. He served as Chief Executive Officer of Bell & Howell Company from February 1993 to December 1997 and of Bell & Howell Operating Company from February 1990 to December 1997. Mr. White is also a director of Bell & Howell Company, Readers Digest Association, Inc. and the Chicago Stock Exchange.
II. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER. The following table sets forth the name, business address and 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. Unless otherwise indicated, each such person is a citizen of the United States of America and the business address of each such person is c/o Ivex Packaging Corporation, 100 Tri-State Drive, Lincolnshire, Illinois 60069. Unless otherwise indicated, each occupation set forth opposite an individual's name refers to employment with the Purchaser.
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT AND NAME FIVE-YEAR EMPLOYMENT HISTORY ---- ---------------------------------------------- Frank V. Tannura............... Director and President of Purchaser. Director of Parent since August 1995. Vice President and Chief Financial Officer of Parent since October 1989. G. Douglas Patterson........... Director and Secretary of Purchaser. Vice President and General Counsel of Parent since June 1991.
I-2 38 Facsimile copies of the Letter of Transmittal, properly completed and duly signed, will be accepted. The Letter of Transmittal, certificates for Shares and any other required documents should be sent or delivered by each shareholder of the Company or his 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: BANKERS TRUST COMPANY By Mail: By Hand: By Overnight Mail or Courier: BT Services Tennessee, Inc. Bankers Trust Company BT Services Tennessee, Inc. Reorganization Unit Corporate Trust & Agency Group Corporate Trust & Agency Group P.O. Box 292737 Receipt & Delivery Window Reorganization Unit Nashville, TN 37229-2737 123 Washington Street, 1st 648 Grassmere Park Road Floor Nashville, TN 37211 New York, NY 10006
Facsimile Copy Number: (615) 835-3701 (For Eligible Institutions Only) For Confirmation Telephone: (615) 835-3572 Questions or requests for assistance or additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Information Agent at its location and telephone numbers set forth below. Shareholders may also contact their broker, dealer, commercial bank or trust company for assistance concerning the Offer. The Information Agent for the Offer is: [INNISFREE M&A INCORPORATED LOGO] 501 Madison Avenue, 20th Floor New York, New York 10022 Telephone (212) 750-5833 or CALL TOLL FREE: (888) 750-5834 EX-99.A.2 3 LETTER OF TRANSMITTAL 1 EXHIBIT (a)(2) LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS) OF ULTRA PAC, INC. PURSUANT TO THE OFFER TO PURCHASE DATED MARCH 26, 1998 BY PACKAGE ACQUISITION, INC. AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF IVEX PACKAGING CORPORATION THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, APRIL 22, 1998, UNLESS THE OFFER IS EXTENDED. The Depositary for the Offer is: BANKERS TRUST COMPANY By Mail: By Hand: By Overnight Mail or Courier: BT Services Tennessee, Inc. Bankers Trust Company BT Services Tennessee, Inc. Reorganization Unit Corporate Trust & Agency Corporate Trust & Agency Group Group P.O. Box 292737 Receipt & Delivery Window Reorganization Unit Nashville, TN 37229-2737 123 Washington Street, 1st 648 Grassmere Park Road Floor New York, NY 10006 Nashville, TN 37211
Facsimile Copy Number: (615) 835-3701 (For Eligible Institutions Only) For Confirmation Telephone: (615) 835-3572 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be used either if certificates are to be forwarded herewith or if delivery of Shares (as defined below) is to be made by book-entry transfer to an account maintained by the Depositary at The Depository Trust Company or the Philadelphia Depository Trust Company (hereinafter collectively referred to as the "Book-Entry Transfer Facilities") pursuant to the procedures set forth in Section 2 of the Offer to Purchase (as defined below). Shareholders who deliver Shares by book-entry transfer are referred to herein as "Book-Entry Shareholders" and other shareholders are referred to herein as "Certificate Shareholders." Shareholders whose certificates are not immediately available or who cannot deliver their Shares and all other documents required hereby to the Depositary or complete the procedures for book-entry transfer prior to the Expiration Date (as defined in the Offer to Purchase) must tender their Shares according to the guaranteed delivery procedure set forth in Section 2 of the Offer to Purchase. See Instruction 2. Delivery of documents to a Book-Entry Transfer Facility does not constitute delivery to the Depositary. 2 [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY TRANSFER FACILITY MAY DELIVER SHARES BY BOOK-ENTRY TRANSFER): Name of Tendering Institution - -------------------------------------------------------------------------------- Check Box of Applicable Book-Entry Transfer Facility: [ ] The Depository Trust Company [ ] Philadelphia Depository Trust Company 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 Owner(s) - -------------------------------------------------------------------------------- Window Ticket Number (if any) - -------------------------------------------------------------------------------- Date of Execution of Notice of Guaranteed Delivery ----------------------------------------------------------------- Name of Institution which Guaranteed Delivery ---------------------------------------------------------------------- Check Box of Applicable Book-Entry Transfer Facility, if Delivered by Book-Entry Transfer: [ ] The Depository Trust Company [ ] Philadelphia Depository Trust Company Account Number - -------------------------------------------------------------------------------- Transaction Code Number - -------------------------------------------------------------------------------- BOXES ABOVE FOR USE BY ELIGIBLE INSTITUTIONS ONLY - -------------------------------------------------------------------------------- DESCRIPTION OF SHARES TENDERED - ------------------------------------------------------------------------------------------------------------------------------- NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) CERTIFICATE(S) TENDERED ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY) - ------------------------------------------------------------------------------------------------------------------------------- TOTAL NUMBER OF SHARES NUMBER CERTIFICATE EVIDENCED BY OF SHARES NUMBER(S)* CERTIFICATE(S)* TENDERED** --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- Total Shares - -------------------------------------------------------------------------------------------------------------------------------
* Need not be completed by shareholders tendering by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Shares evidenced by any certificate(s) delivered to the Depositary are being tendered. See Instruction 4. - -------------------------------------------------------------------------------- [ ] CHECK HERE IF YOU CANNOT LOCATE YOUR CERTIFICATE(S) AND REQUIRE ASSISTANCE IN REPLACING THEM. UPON RECEIPT OF NOTIFICATION BY THIS LETTER OF TRANSMITTAL, THE COMPANY'S STOCK TRANSFER AGENT WILL CONTACT YOU DIRECTLY WITH REPLACEMENT INSTRUCTIONS. NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY. 3 Ladies and Gentlemen: The undersigned hereby tenders to Package Acquisition, Inc., a Minnesota corporation (the "Purchaser") and an indirect wholly-owned subsidiary of Ivex Packaging Corporation, a Delaware corporation ("Parent"), the above-described shares of Common Stock, no par value per share (the "Common Stock"), including the associated preferred share purchase rights (the "Rights" and, together with the Common Stock, the "Shares"), of Ultra Pac, Inc., a Minnesota corporation (the "Company"), pursuant to the Purchaser's offer to purchase all outstanding Shares at a price of $15.50 per Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase dated March 26, 1998 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which, together with the Offer to Purchase, constitute the "Offer"). The undersigned understands that the Purchaser reserves the right to transfer or assign, in whole or in part from time to time, to one or more direct or indirect wholly owned subsidiaries of Parent, the right to purchase Shares tendered pursuant to the Offer. The Company has distributed one Right for each outstanding Share pursuant to the Rights Agreement, dated as of February 27, 1998, as amended, between the Company and Norwest Bank Minnesota, N.A., as Rights Agent. The Rights are currently evidenced by and trade with certificates evidencing the Common Stock. The Company has amended the Rights Agreement to make the Rights Agreement inapplicable to Parent, Purchaser, and their respective affiliates and associates in connection with the transactions contemplated by the Merger Agreement and the Tender Agreements (as such terms are defined in the Offer to Purchase). 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), subject to, and effective upon, acceptance for payment of and payment for the Shares tendered herewith, the undersigned hereby sells, assigns, and transfers to, or upon the order of, the Purchaser all right, title and interest in and to all the Shares that are being tendered hereby (and any and all other Shares or other securities issued or issuable in respect thereof on or after March 26, 1998 (collectively, "Distributions")) and irrevocably constitutes and appoints 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 (a) deliver certificates for such Shares and all Distributions, or transfer ownership of such Shares and all Distributions on the account books maintained by any of the Book-Entry Transfer Facilities, together, in any such case, with all accompanying evidences of transfer and authenticity, to or upon the order of the Purchaser, upon receipt by the Depositary, as the undersigned's agent, of the purchase price (adjusted, if appropriate, as provided in the Offer to Purchase), (b) present such Shares and all Distributions for cancellation and transfer on the Company's books and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares and all Distributions, all in accordance with the terms of the Offer. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the tendered Shares 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, free and clear of all liens, restrictions, claims, charges and encumbrances, and the same will not be subject to any adverse claims. The undersigned will, upon request, execute any signature guarantees or additional documents deemed by the Depositary or the Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the tendered Shares and all Distributions. In addition, the undersigned shall promptly remit and transfer to the Depositary for the account of the Purchaser any such Distributions issued to the undersigned, in respect of the tendered Shares, accompanied by documentation of transfer, and pending such remittance or appropriate assurance thereof, the Purchaser shall be entitled to all rights and privileges as owner of any such Distributions and, subject to the terms of the Merger Agreement (as defined in the Offer to Purchase), may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by the Purchaser in its sole discretion. All authority conferred or agreed to be conferred in this Letter of Transmittal shall be binding upon the successors, assigns, heirs, executors, administrators and legal representatives of the undersigned and shall not be affected by, and shall survive, the death or incapacity of the undersigned. Except as stated in the Offer to Purchase, this tender is irrevocable. 4 The undersigned hereby irrevocably appoints Frank V. Tannura or G. Douglas Patterson, and each of them, and any other designees of the Purchaser, the attorneys and proxies of the undersigned, each with full power of substitution, to vote at any annual, special or adjourned meeting of the Company's shareholders or otherwise act (including pursuant to written consent) in such manner as each such attorney and proxy or his substitute shall in his sole discretion deem proper, to execute any written consent concerning any matter as each such attorney and proxy or his substitute shall in his sole discretion deem proper with respect to, and to otherwise act with respect to, all the Shares tendered hereby which have been accepted for payment by the Purchaser prior to the time any such vote or action is taken (and any and all Distributions issued or issuable in respect thereof) and with respect to which the undersigned is entitled to vote. This appointment is effective when and only to the extent that the Purchaser accepts for payment such Shares as provided in the Offer to Purchase. This power of attorney and proxy is coupled with an interest in the tendered Shares, is irrevocable and is granted in consideration of the acceptance for payment of such Shares in accordance with the terms of the Offer. Such acceptance for payment shall revoke all prior powers of attorney and proxies given by the undersigned at any time with respect to such Shares and no subsequent powers of attorney or proxies may be given by the undersigned (and, if given, will not be deemed effective). The Purchaser reserves the right to require that, in order for Shares 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 and other rights with respect to such Shares, including voting at any meeting of shareholders then scheduled. The undersigned understands that the valid tender of Shares pursuant to any one of the procedures described in Section 2 of the Offer to Purchase and in the instructions hereto will constitute a binding agreement between the undersigned and the Purchaser upon the terms and subject to the conditions of the Offer. The undersigned recognizes that under certain circumstances set forth in the Offer to Purchase, the Purchaser may not be required to accept for payment any of the tendered Shares. The Purchaser's acceptance for payment of Shares pursuant to the Offer will constitute a binding agreement between the undersigned and the Purchaser upon the terms and subject to the conditions of the Offer. Unless otherwise indicated herein under "Special Payment Instructions," please issue the check for the purchase price of any Shares purchased, and/or return any certificates for Shares not tendered or accepted for payment, in the name(s) of the registered holder(s) appearing under "Description of Shares Tendered." Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price of any Shares purchased, and/or any certificates for Shares not tendered or accepted for payment (and accompanying documents, as appropriate) to the address(es) of the registered holder(s) appearing under "Description of Shares Tendered." In the event that both the Special Delivery Instructions and the Special Payment Instructions are completed, please issue the check for the purchase price of any Shares purchased, and/or return any certificates for Shares not tendered or accepted for payment in the name(s) of, and mail said check and/or any certificates to, the person or persons so indicated. In the case of a book- entry delivery of Shares, please credit the account maintained at the Book-Entry Transfer Facility indicated above with any Shares not accepted for payment. 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(s) thereof if the Purchaser does not accept for payment any of the Shares so tendered. SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if certificate(s) for Shares not tendered or not purchased and/or the check for the purchase price of Shares purchased 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) - ------------------------------------------------------- (Tax Identification or Social Security Number) (See Substitute Form W-9 Included Herein) - ------------------------------------------------------- (Account Number) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if Certificate(s) for Shares not tendered or not purchased and/or the check for the purchase price of Shares purchased are to be delivered to someone other than the undersigned or to the undersigned at an address other than that appearing under "Description of Shares Tendered." Deliver: [ ] Check [ ] Certificate(s) to: Name -------------------------------------------------------- (Please Print) Address --------------------------------------------- - ------------------------------------------------------- (Include Zip Code) - ------------------------------------------------------- (Tax Identification or Social Security Number) (See Substitute Form W-9 Included Herein) 5 SHAREHOLDERS SIGN HERE (ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Signature(s) of Owner(s)) (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 TRUSTEES, EXECUTORS, ADMINISTRATORS, GUARDIANS, ATTORNEYS-IN-FACT, OFFICERS OF CORPORATIONS OR OTHERS ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY, PLEASE SET FORTH FULL TITLE. SEE INSTRUCTION 5. FOR INFORMATION CONCERNING SIGNATURE GUARANTEES, SEE INSTRUCTION 1.) Dated: , 1998 ------------------------------------------------------------------------ Name(s) ---------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Please Print) Capacity (full title)----------------------------------------------------------- Address: ----------------------------------------------------------------------- - -------------------------------------------------------------------------------- (Include Zip Code) Daytime Area Code and Telephone Number -------------------------------- Tax Identification or Social Security Number -------------------------------- - -------------------------------------------------------------------------------- (See Substitute Form W-9 Below) GUARANTEE OF SIGNATURE(S) (IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5) AUTHORIZED SIGNATURE --------------------------------------------------------- Name ------------------------------------------------------------------------- (Please Print) Title--------------------------------------------------------------------------- Name of Firm ---------------------------------------------------------------- Address: ----------------------------------------------------------------------- (Include Zip Code) Area Code and Telephone Number ------------------------------------------ Dated: , 1998 ------------------------------------------------------------------------ 6 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURE. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by a firm which is a member of a registered national securities exchange or of the National Association of Securities Dealers, Inc. ("NASD") or a commercial bank or trust company having an office or correspondent in the United States which is a participant in an approved Signature Guarantee Medallion Program (each an "Eligible Institution," and collectively, "Eligible Institutions"). No signature guarantee is required on this Letter of Transmittal (i) if this Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this document, shall include any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) of Shares tendered herewith, unless such holder(s) has completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the facing page hereto or (ii) if such Shares are tendered for the account of an Eligible Institution. See Instruction 5. 2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal is to be completed by stockholders either if certificates for Shares are to be forwarded herewith or if a tender of Shares is to be made pursuant to the procedures for delivery by book-entry transfer set forth in Section 2 of the Offer to Purchase. For Shares to be validly tendered pursuant to the Offer, (i) a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase) in the case of a book-entry delivery, and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of the Depositary's addresses set forth herein and either certificates or a timely Book-Entry Confirmation for tendered Shares must be received by the Depositary at one of such addresses, in each case prior to the Expiration Date (as defined in the Offer to Purchase), or (ii) the tendering stockholder must comply with the guaranteed delivery procedure set forth below. Shareholders whose certificates for Shares are not immediately available or who cannot deliver their certificates and all other required documents to the Depositary or complete the procedures for book-entry transfer prior to the Expiration Date may tender their Shares by properly completing and duly executing the Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth in Section 2 of the Offer to Purchase. Pursuant to such procedures, (i) such tender must be made by or through an Eligible Institution, (ii) a properly completed and duly executed Notice of Guaranteed Delivery provided by the Purchaser (or facsimile thereof) must be received by the Depositary prior to the Expiration Date and (iii) the certificates for all physically tendered Shares, or a Book-Entry Confirmation with respect to all tendered Shares, together with this properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees, and any other documents required by this Letter of Transmittal, must be received by the Depositary within three trading days after the date of execution of such Notice of Guaranteed Delivery, all as provided in Section 2 of the Offer to Purchase. A "trading day" is any day on which the New York Stock Exchange is open for business. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, CERTIFICATES FOR SHARES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. All tendering shareholders, by execution of this Letter of Transmittal (or facsimile thereof), waive any right to receive any notice of the acceptance of their Shares for payment. 3. INADEQUATE SPACE. If the space provided herein is inadequate, the certificate numbers and/or the number of Shares should be listed on a separate schedule attached hereto. 4. PARTIAL TENDERS (APPLICABLE TO CERTIFICATE SHAREHOLDERS ONLY). If fewer than all the Shares evidenced by any certificate submitted are to be tendered, fill in the number of Shares which are to be tendered in the box entitled "Number of Shares Tendered." In such case, new certificate(s) for the remainder of the Shares that were evidenced by the old certificate(s) will be sent to the registered holder, unless otherwise provided in the appropriate box on this Letter of Transmittal, as soon as practicable after the expiration or termination of the Offer. All Shares represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the certificate(s) without any change whatsoever. If any of the Shares tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. 7 If any tendered Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. If this Letter of Transmittal or any certificates or stock powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and proper evidence satisfactory to the Purchaser of their authority so to act must be submitted. When this Letter of Transmittal is signed by the registered owner(s) of the Shares listed and transmitted hereby, no endorsements of certificates or separate stock powers are required unless payment or certificates for Shares not tendered or accepted for payment are to be issued to a person other than the registered owner(s). Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. See Instruction 1. If this Letter of Transmittal is signed by a person other than the registered owner(s) of the shares tendered hereby, the certificates evidencing the Shares tendered hereby must be endorsed or accompanied by appropriate stock powers, in either case, signed exactly as the name(s) of the registered owner(s) appear(s) on the certificates for such Shares. Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution. See Instruction 1. 6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the Purchaser will pay, or cause to be paid, any stock transfer taxes with respect to the transfer and sale of Shares to it or its assignee pursuant to the Offer. If, however, payment of the purchase price is to be made to, or if certificates for Shares not tendered or accepted for payment are to be registered in the name of, any persons other than the registered holder(s), or if tendered certificates are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder or such person) payable on the account of the transfer to such person will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted. Except as provided in this Instruction 6, it will not be necessary for transfer tax stamps to be affixed to the certificates listed in this Letter of Transmittal. 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in the name of and/or certificates for Shares not accepted for payment are to be returned to a person other than the signer of this Letter of Transmittal or if a check is to be sent and/or such certificates are to be returned to a person other than the signer of this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Any shareholder tendering Shares by book-entry transfer will have any Shares not accepted for payment returned by crediting the account maintained by such shareholder at the Book-Entry Transfer Facility from which such transfer was made. 8. WAIVER OF CONDITIONS. Except as otherwise provided in the Offer to Purchase, the Purchaser expressly reserves the absolute right in its sole discretion to waive any of the specified conditions of the Offer or any defect or irregularity in the tender with regard to any Shares tendered. 9. SUBSTITUTE FORM W-9. The tendering shareholder (or other payee) is required to provide the Depositary with a correct Taxpayer Identification Number ("TIN"), generally the shareholder's social security or federal employer identification number, and with certain other information, on Substitute Form W-9, which is provided under "Important Tax Information" below, and to certify that the shareholder (or other payee) is not subject to backup withholding. If a tendering shareholder is subject to backup withholding, he or she must cross out item (2) of the Certification Box on Substitute Form W-9 before signing such Form. Failure to provide the information on the Substitute Form W-9 may subject the tendering shareholder (or other payee) to a $50 penalty imposed by the Internal Revenue Service and to 31% federal income tax withholding on the payment of the purchase price. If the tendering shareholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, he or she should write "Applied For" in the space provided for the TIN in Part I, sign and date the Substitute Form W-9 and sign and date the Certificate of Awaiting Taxpayer Identification Number. If "Applied For" is written in Part I and the Depositary is not provided with a TIN by the time of payment, the Depositary will withhold 31% of all such payments for surrendered Shares thereafter until a TIN is provided to the Depositary. 10. LOST OR DESTROYED CERTIFICATES. If any certificate(s) representing Shares has been lost or destroyed, the shareholder should check the appropriate box on the front of the Letter of Transmittal. The Company's stock transfer agent will then instruct such shareholder as to the procedure to be followed in order to replace the certificate(s). The shareholder will have to post a surety bond of approximately 2% of the current market value of the stock. This Letter of Transmittal and related documents cannot be processed until procedures for replacing lost or destroyed certificates have been followed. 8 11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for assistance or additional copies of the Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 may be directed to the Information Agent at its location set forth below. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE COPY THEREOF) TOGETHER WITH CERTIFICATES OR A BOOK-ENTRY CONFIRMATION FOR SHARES AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF GUARANTEED DELIVERY (OR A FACSIMILE COPY THEREOF) MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE. IMPORTANT TAX INFORMATION Under federal income tax law, a shareholder surrendering Shares must provide the Depositary with his correct TIN on Substitute Form W-9 on this Letter of Transmittal. If the shareholder is an individual, his TIN is his social security number. If the correct TIN is not provided, the shareholder may be subject to a $50 penalty imposed by the Internal Revenue Service and payments made in exchange for the surrendered Shares may be subject to backup withholding of 31%. Certain persons (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding and reporting requirements. In order for an exempt foreign shareholder to avoid backup withholding, that person should complete, sign and submit a Form W-8, Certificate of Foreign Status, signed under penalties of perjury, attesting to his exempt status. A Form W-8 can be obtained from the Depositary. Exempt shareholders, other than foreign shareholders, should furnish their TIN, write "Exempt" on the face of the Substitute Form W-9 and sign, date and return the Substitute Form W-9 to the Depositary. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional instructions. If federal income tax backup withholding applies, the Depositary is required to withhold 31% of any payment made to payee. Backup withholding is not an additional tax. Rather, the federal income tax liability of persons subject to backup 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 Federal income tax backup withholding on payments that are made to a shareholder with respect to Shares purchased pursuant to the Offer, the shareholder is required to notify the Depositary of his or her correct TIN (or the TIN of any other payee) by completing the Substitute Form W-9 included in this Letter of Transmittal certifying (1) that the TIN provided on the Substitute Form W-9 is correct (or that such payee is awaiting a TIN) and that (2) the shareholder is not subject to backup withholding because (i) the shareholder has not been notified by the Internal Revenue Service that the shareholder is subject to federal income tax backup withholding as a result of a failure to report all interest and dividends or (ii) the Internal Revenue Service has notified the shareholder that the shareholder is no longer subject to federal income tax backup withholding. WHAT NUMBER TO GIVE THE DEPOSITARY The shareholder is required to give the Depositary the TIN, generally the social security number or employer identification number of the record owner of the Shares. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 for additional guidance on which number to report. If the tendering shareholder has not been issued a TIN and has applied for a number or intends to apply for a number in the near future, he or she should write "Applied For" in the space provided for the TIN in Part I, sign and date the Substitute Form W-9 and sign and date the Certificate of Awaiting Taxpayer Identification Number, which appears in a separate box below the Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is not provided with a TIN within 60 days, the Depositary will withhold 31% of all payments of the purchase price until a TIN is provided to the Depositary. 9 - ----------------------------------------------------------------------------------------------------------------------- SUBSTITUTE PART I--PLEASE PROVIDE YOUR CORRECT TIN IN THE -------------------------------------- FORM W-9 BOX AT RIGHT AND CERTIFY BY SIGNING AND DATING Social Security Number DEPARTMENT OF THE BELOW: OR TREASURY Employer Identification Number INTERNAL REVENUE SERVICE (If awaiting TIN write "Applied For") ---------------------------------------------------------------------------------------------- Payer's Request for PART II--For Payees NOT subject to backup withholding, see the enclosed Guidelines for Taxpayer Certification of Taxpayer Identification Number on Substitute Form W-9 and complete as Identification Number instructed therein. (TIN) - ----------------------------------------------------------------------------------------------------------------------- CERTIFICATION--Under the penalties of perjury, I certify that: (1) The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me), and (2) I am not subject to backup withholding because either (a) I am exempt from backup withholding, (b) I have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. CERTIFICATE INSTRUCTIONS--You must cross out item (2) above if you have been notified by the IRS that you are 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 item (2). (Also see instructions in the enclosed guidelines.) THE INTERNAL REVENUE SERVICE DOES NOT REQUIRE YOUR CONSENT TO ANY PROVISION OF THIS DOCUMENT OTHER THAN THE CERTIFICATES REQUIRED TO AVOID BACKUP WITHHOLDING. - ----------------------------------------------------------------------------------------------------------------------- SIGNATURE DATE __________________________ , 199 - -----------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY IMPOSED BY THE INTERNAL REVENUE SERVICE AND IN BACKUP WITHHOLDING OF 31% OF 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. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR" IN PART I OF SUBSTITUTE FORM W-9. 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 (a) 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 (b) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number within sixty (60) days, 31% of all reportable payments made to me thereafter will be withheld until I provide a number. SIGNATURE DATE ________________________ 10 Questions and requests for assistance or additional copies of the Offer to Purchase, Letter of Transmittal and other tender offer materials may be directed to the Information Agent as set forth below: The Information Agent for the Offer is: [INNISFREE M&A INCORPORATED LOGO] 501 Madison Avenue, 20th Floor New York, New York 10022 Telephone (212) 750-5833 Call Toll Free: 888-750-5834 EX-99.A.3 4 LETTER OF BROKER, DEALER 1 EXHIBIT (a)(3) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS) OF ULTRA PAC, INC. BY PACKAGE ACQUISITION, INC. AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF IVEX PACKAGING CORPORATION AT $15.50 NET PER SHARE THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, APRIL 22, 1998, UNLESS THE OFFER IS EXTENDED. To Brokers, Dealers, Banks, Trust March 26, 1998 Companies and Other Nominees: We have been engaged by Package Acquisition, Inc., a Minnesota corporation (the "Purchaser"), which is an indirect wholly-owned subsidiary of Ivex Packaging Corporation, a Delaware corporation ("Parent"), to act as the Information Agent in connection with the Purchaser's offer to purchase all outstanding shares of Common Stock, no par value per share (the "Common Stock"), including the associated preferred share purchase rights (the "Rights," and together with the Common Stock, the "Shares"), of Ultra Pac, Inc., a Minnesota corporation (the "Company"), at $15.50 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Purchaser's Offer to Purchase dated March 26, 1998 (the "Offer to Purchase") and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). Please furnish copies of the enclosed materials to those of your clients for whom you hold Shares registered in your name or in the name of your nominee. Enclosed herewith are copies of the following documents: 1. Offer to Purchase dated March 26, 1998; 2. Letter of Transmittal to be used by shareholders of the Company in accepting the Offer; 3. A printed form of letter that may be sent to your clients for whose account you hold Shares in your name or in the name of a nominee, with space provided for obtaining such clients' instructions with regard to the Offer; 4. Notice of Guaranteed Delivery; and 5. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. The Offer is conditioned upon, among other things, there having been validly tendered and not withdrawn prior to the Expiration Date (as defined in the Offer to Purchase) that number of Shares which, when added to any Shares acquired pursuant to the Tender Agreements (as defined in the Offer to Purchase), represents at least a majority of all outstanding Shares on a fully diluted basis on the date of purchase. 2 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), the Purchaser will accept for payment and will pay promptly after the Expiration Date (as defined in the Offer to Purchase) for all shares validly tendered prior to the Expiration Date and not properly withdrawn as, if and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance of such Shares. Payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for such Shares (or a timely Book-Entry Confirmation (as defined in the Offer to Purchase) with respect thereto), (ii) a Letter of Transmittal (or 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), and (iii) any other documents required by the Letter of Transmittal. If holders of Shares wish to tender their Shares, but it is impracticable for them to deliver their certificates on or 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 2 of the Offer to Purchase. YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS PROMPTLY. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, APRIL 22, 1998, UNLESS EXTENDED. Neither the Purchaser nor Parent will pay any fees or commissions to any broker or dealer or other person (other than the Information Agent as described in the Offer to Purchase) in connection with the solicitation of tenders of Shares pursuant to the Offer. The Purchaser will, however, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding materials to their customers. The Purchaser will pay all stock transfer taxes applicable to its purchase of Shares pursuant to the Offer, subject to Instruction 6 of the Letter of Transmittal. Additional copies of the enclosed materials may be obtained by contacting the Information Agent at its address and telephone numbers set forth on the back cover of the enclosed Offer to Purchase. Very truly yours, Innisfree M&A Incorporated 501 Madison Avenue, 20th Floor New York, New York 10022 Telephone: (212) 750-5833 or Call Toll Free (888) 750-5834 NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL RENDER YOU OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, PARENT, THE DEPOSITARY, THE INFORMATION AGENT OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF ANY OF THEM WITH RESPECT TO THE OFFER NOT CONTAINED IN THE OFFER TO PURCHASE OR THE LETTER OF TRANSMITTAL. EX-99.A.4 5 LETTER TO CLIENTS 1 EXHIBIT (a)(4) OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS) OF ULTRA PAC, INC. BY PACKAGE ACQUISITION, INC. AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF IVEX PACKAGING CORPORATION AT $15.50 NET PER SHARE THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY APRIL 22, 1998, UNLESS THE OFFER IS EXTENDED. To Our Clients: Enclosed for your consideration is an Offer to Purchase dated March 26, 1998 (the "Offer to Purchase") and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer") relating to the Offer by Package Acquisition, Inc., a Minnesota corporation (the "Purchaser"), which is an indirect wholly-owned subsidiary of Ivex Packaging Corporation, a Delaware corporation ("Parent"), to purchase for cash all outstanding shares of Common Stock, no par value per share (the "Common Stock"), including the associated preferred share purchase rights (the "Rights", and together with the Common Stock, the "Shares"), of Ultra Pac, Inc., a Minnesota corporation (the "Company"). We are the holder of record of Shares held by us for your account. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. Accordingly, we request your instructions as to whether you wish to tender any of or all of the Shares held by us for your account upon the terms and subject to the conditions set forth in the Offer. Your attention is directed to the following: 1. The offer price is $15.50 per Share, net to the seller in cash, without interest thereon. 2. The Offer is being made for all outstanding Shares. 3. THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER AND DETERMINED THAT TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES. 4. The Offer and withdrawal rights expire at 12:00 midnight, New York City time, on Wednesday, April 22, 1998, unless extended. 5. The Offer is conditioned upon, among other things, there being validly tendered and not withdrawn prior to the Expiration Date (as defined in the Offer to Purchase) that number of Shares which, when added to any Shares acquired pursuant to the Tender Agreements (as defined in the Offer to 2 Purchase), represents at least a majority of the Shares outstanding on a fully-diluted basis on the date of purchase. 6. Any stock transfer taxes applicable to a sale of Shares to the Purchaser pursuant to the Offer will be borne by the Purchaser, except as otherwise provided in Instruction 6 of the Letter of Transmittal. If you wish to have us tender any of or all of the Shares held by us for your account, please so instruct us by completing, executing and returning to us the instruction form set forth on the reverse side of this letter. Your instructions to us should be forwarded promptly to permit us to submit a tender on your behalf prior to the expiration of the Offer. An envelope to return your instructions to us is enclosed. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise specified on the reverse side of this letter. The Offer is made solely by the Offer to Purchase and the related Letter of Transmittal. 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 or acceptance of the Offer would not be in compliance with the laws of such jurisdiction. If the securities laws of any jurisdiction require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser by one or more registered brokers or dealers licensed under the law of such jurisdiction. 3 INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS) OF ULTRA PAC, INC. The undersigned acknowledge(s) receipt of your letter, the enclosed Offer to Purchase dated March 26, 1998 and the related Letter of Transmittal, in connection with the offer by Package Acquisition, Inc., a Minnesota corporation and an indirect wholly-owned subsidiary of Ivex Packaging Corporation, a Delaware corporation, to purchase all outstanding shares of common stock, no par value per share (the "Common Stock"), including the associated preferred share purchase rights (the "Rights", and together with the Common Stock, the "Shares"), of Ultra Pac, Inc., a Minnesota corporation. This will instruct you to tender the number of Shares indicated below held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in such Offer to Purchase and related Letter of Transmittal. Dated: __________, 1998 NUMBER OF SHARES TO BE TENDERED* ______________ SHARES I (we) understand that if I (we) sign this instruction form without indicating a lesser number of Shares in the space above, all Shares held by you for my (our) account will be tendered. ------------------------------------------------------------------- SIGNATURE(S) ------------------------------------------------------------------- ------------------------------------------------------------------- PRINT NAME(S) ------------------------------------------------------------------- ------------------------------------------------------------------- PRINT ADDRESS(ES) ------------------------------------------------------------------- AREA CODE AND TELEPHONE NUMBER ------------------------------------------------------------------- TAX ID OR SOCIAL SECURITY NUMBER - --------------- * Unless otherwise indicated, it will be assumed that all Shares held by your firm for my (our) account are to be tendered. EX-99.A.5 6 NOTICE OF GUARANTEE DELIVERY 1 EXHIBIT (a)(5) NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS) OF ULTRA PAC, INC. As set forth in Section 2 of the Offer to Purchase (as defined below), this form or one substantially equivalent hereto must be used to accept the Offer (as defined below) if certificates for shares of Common Stock, no par value per share (the "Common Stock"), including the associated preferred share purchase rights (the "Rights," and together with the Common Stock, the "Shares"), of Ultra Pac, Inc., a Minnesota corporation (the "Company"), are not immediately available, or if the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary at the address set forth below prior to the Expiration Date (as defined in the Offer to Purchase). This form may be delivered by hand to the Depositary or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution (as defined in the Offer to Purchase). See Section 2 of the Offer to Purchase. The Depositary for the Offer is: BANKERS TRUST COMPANY By Mail: By Hand: By Overnight Mail or Courier: BT Services Tennessee, Inc. Bankers Trust Company BT Services Tennessee, Inc. Reorganization Unit Corporate Trust & Agency Group Corporate Trust & Agency Group P.O. Box 292737 Receipt & Delivery Window Reorganization Unit Nashville, TN 37229-2737 123 Washington Street, 1st 648 Grassmere Park Road Floor New York, NY 10006 Nashville, TN 37211
Facsimile Copy Number: (615) 835-3701 (For Eligible Institutions Only) For Confirmation Telephone: (615) 835-3572 DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an Eligible Institution under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. 2 Ladies and Gentlemen: The undersigned hereby tenders to Package Acquisition, Inc., a Minnesota corporation (the "Purchaser"), which is an indirect wholly-owned subsidiary of Ivex Packaging Corporation, a Delaware corporation, upon the terms and subject to the conditions set forth in the Purchaser's Offer to Purchase dated March 26, 1998 (the "Offer to Purchase"), and the related Letter of Transmittal, receipt of which is hereby acknowledged, the number of Shares (as such term is defined in the Offer to Purchase) set forth below, all pursuant to the guaranteed delivery procedures set forth in Section 2 of the Offer to Purchase. Number of Shares: Certificate Nos. (if available): - ------------------------------------------------------ - ------------------------------------------------------ (Check one box if Shares will be tendered by book-entry transfer) [ ] The Depository Trust Company [ ] Philadelphia Depository Trust Company Account Number: - ---------------------------------- Dated: - ----------------------------------------, 1998 Name(s) of Record Holder(s): - ------------------------------------------------------ - ------------------------------------------------------ Please Print Address(es): - --------------------------------------- - ------------------------------------------------------ Zip Code Area Code and Tel. No.: - ------------------------------------------------------ - ------------------------------------------------------ Signature(s) Dated: - --------------------------------------, 1998 3 GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a participant in the Security Transfer Agent's Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program, hereby guarantees to deliver to the Depositary either the certificates representing the Shares tendered hereby, in proper form for transfer, or a Book-Entry Confirmation with respect to such Shares, in any such case together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or an Agent's Message, and any other required documents within three trading days (as defined in the Offer to Purchase) after the date hereof. The Eligible Institution that completes this form must communicate the guarantee to the Depositary and must deliver the Letter of Transmittal 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. All capitalized terms used herein have the meanings set forth in the Offer to Purchase. Name of Firm: ------------------------------------- ----------------------------------------------------- Authorized Signature Address: -------------------------------------------- Name: ---------------------------------------------- Please Print - ----------------------------------------------------- Zip Code Area Code and Tel. No.: -------------------------- Title: -----------------------------------------------
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES FOR SHARES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. Dated: __________, 1998 EX-99.A.6 7 FORM W-9 GUIDELINES 1 EXHIBIT (a)(6) 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 SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: 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(1) 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 IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF-- - ------------------------------------------------------------ 9. A valid trust, estate, or pension The legal entity trust (Do 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 your individual name. You may also enter your business name. You may use either your Social Security number or your Employer Identification number. (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 OF 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 (for individuals), or Form SS-4, Application for Employer Identification Number (for businesses and all other entities), at the local office of the Social Security Administration or the Internal Revenue Service (the "IRS") and apply for a number. PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING The following is a list of payees exempt from backup withholding and for which no information reporting is required. For interest and dividends, all listed payees are exempt except item (9). For broker transactions, payees listed in items (1) through (13) and a person registered under the Investment Advisers Act of 1940 who regularly acts as a broker are exempt. Payments subject to reporting under sections 6041 and 6041A are generally exempt from backup withholding only if made to payees described in items (1) through (7), except a corporation that provides medical and health care services or bills and collects payments for such services is not exempt from backup withholding or information reporting. Only payees described in items (2) through (6) are exempt from backup withholding for barter exchange transactions, patronage dividends, and payments by certain fishing boat operators. (1) A corporation. (2) An organization exempt from tax under section 501(a), or an IRA, or a custodial account under section 403(b)(7). (3) The United States or any of its agencies or instrumentalities. (4) A state, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities. (5) A foreign government or any of its political subdivisions, agencies or instrumentalities. (6) An international organization or any of its agencies or instrumentalities. (7) A foreign central bank of issue. (8) A dealer in securities or commodities required to register in the United States or a possession of the United States. (9) A futures commission merchant registered with the Commodity Futures Trading Commission. (10) A real estate investment trust. (11) An entity registered at all times during the tax year under the Investment Company Act of 1940. (12) A common trust fund operated by a bank under section 584(a). (13) A financial institution. (14) A middleman known in the investment community as a nominee or listed in the most recent publication of the American Society of Corporate Secretaries, Inc., Nominee List. (15) A trust exempt from tax under section 664 or described in section 4947. 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 of the Code. - - 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 of the Code). - - Payments described in Section 6049(b)(5) of the Code to non-resident aliens. - - Payments on tax-free covenant bonds under Section 1451 of the Code. - - 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, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. IF YOU ARE A NON-RESIDENT ALIEN OR A FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, FILE WITH PAYER A COMPLETED INTERNAL REVENUE FORM W-8 (CERTIFICATE OF FOREIGN STATUS). 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 Sections 6041, 6041A(a), 6045, and 6050A and 6050N of the Code and the regulations promulgated thereunder. 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 the IRS. The IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Payers must generally withhold 31% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail to furnish your correct taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Willfully 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 8 PRESS RELEASE 1 EXHIBIT (a)(7) FOR IMMEDIATE RELEASE FOR: MEDIA CONTACT: Ivex Packaging Corporation Richard R. Cote 100 Tri-State Drive Ivex Packaging Corporation Suite 200 (847) 945-9100 Lincolnshire, Illinois 60069 Ultra Pac, Inc. Brad Yopp 22051 Industrial Boulevard Ultra Pac, Inc. Rogers, Minnesota 55374 (612) 428-8340 Ivex Packaging Corporation and Ultra Pac, Inc. Announce Signing of a Definitive Merger Agreement March 23, 1998 - Ivex Packaging Corporation (NYSE: IXX) ("Ivex") and Ultra Pac Inc. (NASDAQ: UPAC) ("Ultra Pac") today jointly announced that the two companies have signed a definitive merger agreement for the acquisition of Ultra Pac by Ivex. Under the terms of the agreement, a subsidiary of Ivex will commence a tender offer on March 26, 1998, to acquire all of the outstanding shares of Ultra Pac for $15.50 per share in cash. Following the completion of the tender offer, Ivex will consummate a second step merger in which remaining Ultra Pac shareholders will also receive $15.50 per share in cash. Calvin Krupa, Chief Executive Officer of Ultra Pac, stated that "We are excited to be combining Ultra Pac with Ivex because Ivex is a world class company that will help us continue to grow Ultra Pac's business. We believe the transaction is in the best interests of the Ultra Pac shareholders, our employees and our customers." George Bayly, President and Chief Executive Officer of Ivex, stated "We are delighted to integrate Ultra Pac's PET business into Ivex's product line thereby accelerating our strategic growth in PET. Ultra Pac will operate as an independent business unit within Ivex, and the management, employees and customers of Ultra Pac will be a tremendous addition to the Ivex business. Ultra Pac is the market leader in PET and will be highly complementary to our leadership position in OPS." 2 The transaction has been approved unanimously by the board of directors of each company. The tender offer and merger are subject to customary conditions, including the tender of a majority of Ultra Pac's shares and termination of the waiting period under U.S. anti-trust laws. The tender offer will be made pursuant to definitive documents to be filed with the Securities and Exchange Commission. Ivex is a vertically integrated specialty packaging company that designs and manufactures value-added plastic and paper based flexible packaging products for consumer and industrial packaging markets. Ultra Pac designs, manufactures, markets and sells plastic containers and packaging for the food industry. Statements contained in this press release which are not historical facts are forward-looking statements. Such forward-looking statements are necessary estimates reflecting the best judgment of the party making such statements based upon current information and involve a number of risks and uncertainties. Forward-looking statements contained in this press release or in other public statements of the parties should be considered in light of those factors. There can be no assurance that such factors or other factors will not affect the accuracy of such forward-looking statements. 2 EX-99.A.8 9 FORM OF SUMMARY ADVERTISEMENT 1 EXHIBIT (a)(8) This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares (as defined below). The Offer is made solely by the Offer to Purchase dated March 26, 1998 and the related Letter of Transmittal 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 in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction or any administrative or judicial action pursuant thereto. In any jurisdiction where securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of Package Acquisition, Inc. by one or more registered brokers or dealers licensed under the laws of such jurisdiction. NOTICE OF OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK (INCLUDING THE ASSOCIATED PREFERRED SHARE PURCHASE RIGHTS) OF ULTRA PAC, INC. AT $15.50 NET PER SHARE BY PACKAGE ACQUISITION, INC. AN INDIRECT WHOLLY-OWNED SUBSIDIARY OF IVEX PACKAGING CORPORATION Package Acquisition, Inc., a Minnesota corporation (the "Purchaser"), which is an indirect wholly-owned subsidiary of Ivex Packaging Corporation, a Delaware corporation ("Parent"), is offering to purchase all outstanding shares of Common Stock, no par value per share (the "Common Stock"), including the associated preferred share purchase rights (the "Rights" and, together with the Common Stock, the "Shares"), of Ultra Pac, Inc., a Minnesota corporation (the "Company"), at a price of $15.50 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 March 26, 1998 (the "Offer to Purchase"), and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, APRIL 22, 1998, UNLESS THE OFFER IN EXTENDED. The Offer is conditioned upon, among other things, (i) there having been validly tendered and not withdrawn prior to the expiration of the Offer a number of Shares which, when added to any Shares acquired pursuant to the Tender Agreements (as defined in the Offer to Purchase), represents a majority of all outstanding Shares on a fully-diluted basis and (ii) the expiration or termination of any applicable waiting period under the Hart- Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"). The Offer is also subject to other terms and conditions. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of March 28, 1998 (the "Merger Agreement"), by and among Parent, the Purchaser and the Company. The Merger Agreement provides that, following the consummation of the Offer, the Purchaser will be merged with and into the Company (the "Merger") and each outstanding Share (other than Shares held by shareholders who perfect dissenters' rights under Minnesota law) will be converted into the right to receive $15.50 in cash, without interest thereon, or any higher price paid in the Offer (the "Offer Price"). The Company has amended the Rights Agreement, dated as of February 27, 1998, between the Company and Norwest Bank Minnesota, N.A., as Rights Agent, to make the Rights Agreement inapplicable to Parent, Purchaser and their respective affiliates and associates in connection with the transactions contemplated by the Merger Agreement and the Tender Agreements. 2 In connection with the Merger Agreement, Parent entered into Tender Agreements with certain shareholders of the Company who collectively own approximately 13.09% of the outstanding Shares, pursuant to which such shareholders agreed, among other things, to tender their shares in the Offer and grant an option on their shares to Parent at the Offer Price. The Board of Directors of the Company and a disinterested committee of the Board of Directors (as contemplated by Sections 302A.673 and 302A.675 of the Minnesota Business Corporation Act) have each unanimously approved the Offer and the Merger and determined that the terms of the Offer and the Merger are fair to, and in the best interests of, the shareholders of the Company and unanimously recommend that shareholders of the Company accept the Offer and tender all of their shares. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares properly tendered to the Purchaser and not withdrawn as, if and when the Purchaser gives oral or written notice to Bankers Trust Company (the "Depositary"), of the Purchaser's acceptance for payment of such Shares. 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 purchase price therefor with the Depositary, which will act as agent for tendering shareholders for the purpose of receiving payment from the Purchaser and transmitting payment to tendering shareholders. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for (or a timely Book-Entry Confirmation (as defined in the Offer to Purchase) with respect to) such Shares, (ii) a Letter of Transmittal (or 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), and (iii) any other documents required by the Letter of Transmittal. Under no circumstances will interest be paid on the purchase price of the Shares, regardless of any extension of the Offer or any delay in making such payment. Except as otherwise provided below, tenders of Shares are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time prior to the Expiration Date and, unless theretofore accepted for payment and paid for by the Purchaser pursuant to the Offer, may also be withdrawn at any time after Tuesday, May 26, 1998. 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 as set forth in the Offer to Purchase and must specify the name of the person having tendered the Shares to be withdrawn, the number of shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If certificates for Shares have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares have been tendered by an Eligible Institution (as defined in Section 2 of the Offer to Purchase), the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been delivered pursuant to the procedure for book-entry transfer as set forth in Section 2 of the Offer to Purchase, any notice of withdrawal must also specify the name and number of the account at the appropriate Book-Entry Transfer Facility (as defined in the Offer to Purchase) to be credited with the withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's procedures. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not validly tendered for any purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in Section 2 of the Offer to Purchase at any time prior to the Expiration Date. All questions as to the form and validity (including time of receipt of notices of withdrawal) will be determined by the Purchaser in its sole discretion, which determination will be final and binding. Subject to the terms of the Merger Agreement, the Purchaser expressly reserves the right, in its sole discretion, at any time or from time to time, to extend the period of time during which the Offer is open by giving oral or written notice of such extension to the Depositary. The information required to be disclosed by paragraph (e)(1)(vii) of Rule 14d-6 under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. The Company has supplied to the Purchaser the Company's shareholder lists and security position listings for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase, the related Letter of Transmittal and other relevant materials will be mailed to record holders of Shares, and will be furnished to brokers, dealers, banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the shareholder lists, or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. The Offer to Purchase and the Letter of Transmittal contain important information that should be read before any decision is made with respect to the Offer. Questions and requests for assistance or for copies of the Offer to Purchase, the Letter of Transmittal and other tender offer documents may be directed to the Information Agent as set forth below, and copies will be furnished at the Purchaser's expense. No fees or commissions will be paid by Parent or the Purchaser to brokers, dealers or other persons other than the Information Agent for soliciting tenders of Shares pursuant to the Offer. The Information Agent for the Offer is: [INNISFREE LOGO] M&A Incorporated 501 Madison Avenue, 20th Floor New York, New York 10022 Telephone: (212) 750-5833 or Call Toll Free: (888) 750-5834 March 26, 1998 EX-99.C.1 10 AGREEMENT AND PLAN OF MERGER 1 Exhibit (c)(1) AGREEMENT AND PLAN OF MERGER dated as of March 23, 1998 among IVEX PACKAGING CORPORATION, PACKAGE ACQUISITION, INC. and ULTRA PAC, INC. 2 TABLE OF CONTENTS Page ---- ARTICLE 1 DEFINITIONS.......................................................... 1 ARTICLE 2 THE OFFER AND MERGER................................................ 6 2.1 The Offer......................................... 6 2.2 Company Actions................................... 8 2.3 Directors......................................... 10 2.4 The Merger........................................ 11 2.5 Effective Time; Filing of Articles of Merger...... 11 2.6 Articles of Incorporation......................... 12 2.7 By-Laws........................................... 12 2.8 Directors and Officers............................ 12 2.9 Additional Actions................................ 12 2.10 Time and Place of Closing......................... 12 2.11 Conversion of Company Common Stock................ 13 2.12 Exchange of Shares................................ 13 2.13 No Further Rights or Transfers; Cancellation of Treasury Shares................................. 16 2.14 Dissenters' Rights................................ 16 2.15 Special Meeting of Shareholders................... 17 2.16 Merger Without Meeting of Shareholders............ 18 2.17 Commercially Reasonable Efforts................... 18 2.18 Existing Options.................................. 18 ARTICLE 3 OTHER AGREEMENTS.................................................... 19 3.1 Access............................................ 19 3.2 Disclosure Letter................................. 19 3.3 Deliveries of Information......................... 20 3.4 Acquisition Proposals............................. 20 3.5 Public Announcements.............................. 21 3.6 Confidentiality Agreement......................... 21 i 3 Page ---- 3.7 Regulatory and Other Approvals.................... 22 ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................... 22 4.1 Organization; Business............................ 22 4.2 Capitalization.................................... 23 4.3 Authorization; Enforceability..................... 24 4.4 No Violation or Conflict.......................... 24 4.5 Title to Assets................................... 25 4.6 Litigation........................................ 25 4.7 Books and Records; Company Financial Statements... 26 4.8 Absence of Certain Changes........................ 26 4.9 Buildings and Equipment........................... 28 4.10 Performance of Contracts.......................... 28 4.11 Employee Benefit Plans............................ 28 4.12 Brokers........................................... 30 4.13 Taxes............................................. 30 4.14 Real Estate....................................... 31 4.15 Governmental Approvals............................ 31 4.16 No Pending Acquisitions........................... 31 4.17 Labor Matters..................................... 32 4.18 Existing Permits and Violations of Law............ 32 4.19 Intangible Assets................................. 33 4.20 Customers and Suppliers........................... 33 4.21 Environmental Protection.......................... 33 4.22 Vote Required..................................... 36 4.23 Returns........................................... 36 4.24 SEC Reports....................................... 36 4.25 Content of Proxy Statement........................ 37 4.26 Opinion of Financial Advisor...................... 37 4.27 Certain Agreements................................ 37 4.28 Rights Agreement.................................. 38 ii 4 Page ---- ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE PARENT AND ACQUISITION................................................ 38 5.1 Due Incorporation and Authority................... 38 5.2 Consents and Approvals............................ 39 5.3 No Broker's, Finder's or Similar Fees............. 39 5.4 No Violation or Conflict.......................... 39 5.5 Litigation........................................ 40 5.6 Sufficient Funds.................................. 40 ARTICLE 6 COVENANTS........................................................... 40 6.1 Conduct of Business by the Company................ 40 6.2 Shareholder Option Agreements..................... 42 ARTICLE 7 CONDITIONS.......................................................... 43 7.1 Conditions to Each Party's Obligation to Effect the Merger...................................... 43 7.2 Condition to Parent's and Acquisition's Obligation to Effect the Merger............................ 43 ARTICLE 8 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION......................................... 44 8.1 No Survival of Representations and Warranties..... 44 8.2 Directors' and Officers' Indemnification.......... 44 ARTICLE 9 TERMINATION......................................................... 45 9.1 Termination....................................... 45 9.2 Rights on Termination............................. 47 iii 5 Page ---- 9.3 Termination Fee Payable to the Parent............. 47 9.4 Other Remedies.................................... 47 ARTICLE 10 MISCELLANEOUS....................................................... 48 10.1 Expenses.......................................... 48 10.2 Entire Agreement; Amendment....................... 48 10.3 Governing Law..................................... 48 10.4 Assignment........................................ 48 10.5 Notices........................................... 48 10.6 Counterparts; Headings............................ 50 10.7 Interpretation.................................... 50 10.8 Specific Performance.............................. 50 10.9 No Reliance....................................... 50 10.10 Exhibits and Schedules............................ 50 10.11 No Third Party Beneficiary........................ 51 iv 6 EXHIBITS Exhibit 1 Articles of Merger Exhibit 2 Form of Shareholder Option Agreement v 7 AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of March 23, 1998 (the "Agreement"), among IVEX PACKAGING CORPORATION, a Delaware corporation (the "Parent"), PACKAGE ACQUISITION, INC., a Minnesota corporation and a wholly owned indirect subsidiary of Parent ("Acquisition"), and ULTRA PAC, INC., a Minnesota corporation (the "Company"). The Company and Acquisition are hereinafter sometimes collectively referred to as the "Constituent Corporations." WHEREAS, the Boards of Directors of the Parent, Acquisition and the Company have approved and deem it advisable and in the best interests of their respective shareholders to consummate the acquisition of the Company by the Parent upon the terms and subject to the conditions set forth herein; WHEREAS, as a condition and inducement to Parent's and Acqui sition's willingness to enter into this Agreement, concurrently with the execution hereof, certain beneficial and record shareholders of the Company are entering into tender and option agreements (each, a "Tender and Option Agreement") obligating such shareholder to tender his shares of Company Common Stock pursuant to the Offer (each as hereinafter defined) and granting an option to Parent with respect to their respective shares of Company Common Stock, substantially in the form attached hereto as Exhibit 2; and NOW, THEREFORE, in consideration of the mutual covenants, representations, warranties and agreements contained herein, and intending to be legally bound hereby, the Parent, Acquisition and the Company agree as follows: ARTICLE 1 DEFINITIONS When used in this Agreement, and in addition to the other terms defined herein, the following terms shall have the meanings specified: 1.1 Accounts. "Accounts" shall mean all accounts receivable, notes and associated rights owned by the Company. 8 1.2 Affiliate. "Affiliate" shall mean, in relation to any party hereto, any entity directly or indirectly controlling, controlled by or under common control with such party. 1.3 Agreement. "Agreement" shall mean this Agreement and Plan of Merger, together with the Exhibits attached hereto and the Disclosure Letter, as the same may be amended from time to time in accordance with the terms hereof. 1.4 Articles of Merger. "Articles of Merger" shall mean the Articles of Merger in substantially the form of Exhibit 1 attached to this Agreement. 1.5 Buildings. "Buildings" shall mean all buildings, fixtures, structures and improvements leased or owned by the Company. 1.6 Code. "Code" shall mean the Internal Revenue Code of 1986, as the same may be in effect from time to time. 1.7 Company. "Company" shall mean Ultra Pac, Inc., a Minnesota corporation. 1.8 Company Common Stock. "Company Common Stock" shall mean shares of common stock of the Company, no par value. 1.9 Company Financial Statements. "Company Financial Statements" shall mean the audited Consolidated Balance Sheet, Consolidated Statement of Operations, Consolidated Statement of Cash Flows and Consolidated Statement Shareholders Equity of Company and related notes for each of the fiscal years ended on January 31, 1995, January 31, 1996 and January 31, 1997. 1.10 Contracts. "Contracts" shall mean all of the material contracts, agreements, and obligations, written or oral, to which the Company is a party or by which the Company or any of its assets are bound, including, without limitation, any loan, bond, mortgage, indenture, lease, instrument, franchise or license. 1.11 Control. "Control" (including the terms "controlling," "controlled by," and "under common control with"), as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or 2 9 cause the direction of the management and policies of such Person, through the ownership of voting securities or by contract. 1.12 Dissenting Shares. "Dissenting Shares" shall mean shares of the Company Common Stock which dissent from the Merger in accordance with the provisions of the MBCA. 1.13 Employees. "Employees" shall mean all of the employees of the Company. 1.14 Employee Benefit Plans. "Employee Benefit Plans" shall mean any pension plan, profit sharing plan, bonus plan, incentive compensation plan, stock purchase plan, stock ownership plan, stock option plan, stock appreciation plan, employee benefit plan, employee benefit policy, retirement plan, fringe benefit program, insurance plan, severance plan, disability plan, health care plan, sick leave plan, death benefit plan, or any other plan, program or policy to provide retirement income, fringe benefits or other benefits to former or current employees of the Company (including, without limitation, any employee pension benefit plan, employee welfare plan or multi-employer plan as each term is defined in ERISA). 1.15 Equipment. "Equipment" shall mean all machinery, equipment, boilers, furniture, fixtures, motor vehicles, furnishings, parts, tools, office equipment, computers and other items of tangible personal property owned or used by the Company. 1.16 ERISA. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as the same may be in effect from time to time. 1.17 Existing Corporate Jurisdictions. "Existing Corporate Jurisdictions" shall mean those states, provinces and foreign countries in which the Company is qualified to do business as a foreign corporation. 1.18 Existing Insurance Policies. "Existing Insurance Policies" shall mean all of the insurance policies currently in effect and owned by the Company. 1.19 Existing Liens. "Existing Liens" shall mean those Liens affecting any of the assets or properties of the Company. 3 10 1.20 Existing Options. "Existing Options" shall mean any of the following relating to any capital stock or other equity interest of the Company and as described in the Disclosure Letter (as defined in Section 3.2): (a) options or warrants (whether vested or not) to purchase or other rights (including registration rights), agreements, arrangements or commitments of any character to which the Company is a party relating to the issued or unissued capital stock or other equity or phantom equity interests of the Company to grant, issue or sell any shares of the capital stock or other equity or phantom equity interests of the Company by sale, lease, license or otherwise; (b) rights to subscribe for or purchase any shares of the capital stock or other equity or phantom equity interests of the Company; or (c) Contracts with respect to any right to purchase, put or call. 1.21 Existing Permits. "Existing Permits" shall mean those permits, licenses, approvals, qualifications, authorizations, and registrations required by Law which the Company has or holds. 1.22 Existing Plans. "Existing Plans" shall mean all material Employee Benefit Plans of the Company. 1.23 Indebtedness. "Indebtedness" shall mean all liabilities or obligations of the Company, whether primary or secondary or absolute or contingent, in excess of $50,000 as to any single item: (a) for borrowed money; or (b) evidenced by notes, bonds, debentures or similar instruments; or (c) secured by Liens on any assets of the Company. 1.24 Intangible Assets. "Intangible Assets" shall mean (a) any invention, United States and foreign patents, pending patent applications, trade names, trade dress, logos, corporate names, trademarks, service marks, trademark registrations, service mark registrations, pending trademark applications, pending service mark applications, registered copyrights, and pending copyright applications, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and all applications, registrations, and renewals in connection therewith; (b) proprietary software; and (c) all trade secrets and confidential business information (including ideas, research and development, know-how, formulas, compositions, manufacturing and production processes and techniques, technical data, designs, drawings, specifications, customer and supplier lists, pricing and cost information, and business and marketing plans and proposals). 4 11 1.25 Investment. "Investment" by the Company shall mean (a) any transfer or delivery of cash, stock or other property or value by the Company in exchange for equity, debt, preferred stock, partnership interest, participation or any other security of another Person; (b) any loan or capital contribution to or in any other Person; (c) any guaranty of any obligation to pay money to, or perform an obligation, of any other Person; and (d) any investments in any property or assets other than properties and assets acquired and used in the ordinary course of the business of the Company. 1.26 Law. "Law" shall mean any foreign, federal, state or local governmental law, rule, regulation or requirement, including any rules, regulations and orders promulgated thereunder and any orders, decrees, consents or judgments of any governmental regulatory agencies and courts having the force of law, other than any Environmental Laws. 1.27 Lien. "Lien" shall mean, with respect to any asset (real, personal or mixed): (a) any mortgage, pledge, lien, easement, lease, title defect or imperfection or any other form of security interest, whether imposed by Law or by Contract; and (b) the interest of a vendor or lessor under any conditional sale agreement, financing lease or other title retention agreement relating to such asset. 1.28 Material Adverse Effect. "Material Adverse Effect" shall mean a material adverse effect on the business, condition (financial or otherwise), results of operations, assets or liabilities of the Company taken as a whole. 1.29 MBCA. "MBCA" shall mean the Minnesota Business Corporation Act. 1.30 Merger. "Merger" shall mean the merger of Acquisition with and into the Company pursuant to this Agreement. 1.31 Optionholders. "Optionholders" shall mean all Persons holding the Existing Options. 1.32 Permitted Liens. "Permitted Liens" shall mean those of the Existing Liens that do not materially detract from the value of the property or assets of the Company taken as a whole subject thereto and do not materially impair the business or operations of the Company taken as a whole. 5 12 1.33 Person. "Person" shall mean a natural person, corporation, limited liability company, association, joint stock company, trust, partnership, governmental entity, agency or branch or department thereof, or any other legal entity. 1.34 Real Estate. "Real Estate" shall mean the parcels of real property owned or leased by the Company. 1.35 Rights. "Rights" shall mean those Preferred Share Purchase Rights issued pursuant to the Rights Agreement dated February 27, 1998. 1.36 Shareholders. "Shareholders" shall mean all Persons owning any shares of Company Common Stock. 1.37 Subsidiary. "Subsidiary" shall mean any corporation, at least a majority of the outstanding capital stock of which (or any class or classes, however designated, having ordinary voting power for the election of at least a majority of the board of directors of such corporation) shall at the time be owned by the relevant Person directly or through one or more corporations which are themselves Subsidiaries. ARTICLE 2 THE OFFER AND MERGER 2.1 The Offer. (a) As promptly as practicable (but in no event later than five business days after the public announcement of the execution hereof), Acquisition shall commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder (collectively, the "Exchange Act")) a tender offer (the "Offer") for all of the outstanding shares of Company Common Stock (including the Rights) at a price of $15.50 per share of Company Common Stock, net to the seller in cash (such price, or any such higher price per share as may be paid in the Offer, being referred to herein as the "Offer Price"), subject to there being validly tendered and not withdrawn prior to the expiration of the Offer, that number of shares of Company Common Stock which represents at least a majority of the Company Common Stock outstanding on a fully diluted basis (the "Minimum Condition") and to the other conditions set forth in 6 13 Annex A hereto, and shall consummate the Offer in accordance with its terms ("fully diluted basis" means issued and outstanding Company Common Stock and Company Common Stock subject to issuance under warrants and outstanding employee stock options). The obligations of Acquisition to accept for payment and to pay for any Company Common Stock validly tendered on or prior to the expiration of the Offer and not withdrawn shall be subject only to the Minimum Condition and the other conditions set forth in Annex A hereto. The Offer shall be made by means of an offer to purchase (the "Offer to Purchase") containing the terms set forth in this Agreement, the Minimum Condition and the other conditions set forth in Annex A hereto. Acquisition shall not amend or waive the Minimum Condition and shall not decrease the Offer Price or decrease the number of shares of Company Common Stock sought, or amend any other condition of the Offer in any manner adverse to the holders of the Company Common Stock without the prior written consent of the Company; provided, however, that if on the initial scheduled expiration date of the Offer which shall be 20 business days after the date of the Offer is commenced, the sole condition remaining unsatisfied is the failure of the waiting period under the HSR Act (as defined below) to have expired or been terminated, Acquisition shall extend the expiration date from time to time until two business days after the expiration of the waiting period under the HSR Act. Acquisition shall, on the terms and subject to the prior satisfaction or waiver of the conditions of the Offer, accept for payment and pay for Company Common Stock tendered as soon as it is legally permitted to do so under applicable law; provided, however, that if, immediately prior to the initial expiration date of the Offer (as it may be extended), the Company Common Stock tendered and not withdrawn pursuant to the Offer equals less than 90% of the outstanding Company Common Stock, Acquisition may extend the Offer one time for a period not to exceed twenty business days, notwithstanding that all conditions to the Offer are satisfied as of such expiration date of the Offer. (b) As soon as practicable on the date the Offer is commenced, Parent and Acquisition shall file with the United States Securities and Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 with respect to the Offer (together with all amendments and supplements thereto and including the exhibits thereto, the "Schedule 14D-1"). The Schedule 14D-1 will include, as exhibits, the Offer to Purchase and a form of letter of transmittal and summary advertisement (collectively, together with any amendments and supplements thereto, the "Offer Documents"). The Offer Documents will comply in all material respects with the provisions of applicable federal securities laws and, on the date filed with the SEC and on the date first published, sent or given to the Company's shareholders, shall not contain any untrue statement of a material fact or 7 14 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 were made, not misleading, except that no representation is made by Parent or Acquisition with respect to information furnished by the Company to Parent or Acquisition, in writing, expressly for inclusion in the Offer Documents. The information supplied by the Company to Parent or Acquisition, in writing, expressly for inclusion in the Offer Documents and by Parent or Acquisition to the Company, in writing, expressly for inclusion in the Schedule 14D-9 (as hereinafter defined) will not 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 were made, not misleading. (c) Each of Parent and Acquisition will take all steps necessary to cause the Offer Documents to be filed with the SEC and to be disseminated to holders of the Company Common Stock, in each case as and to the extent required by applicable federal securities laws. Each of Parent and Acquisition, on the one hand, and the Company, on the other hand, will promptly 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 and Parent and Acquisition will 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 the Company Common Stock, in each case as and to the extent required by applicable federal securities laws. The Company and its counsel shall be given the opportunity to review the Schedule 14D-1 before it is filed with the SEC. In addition, Parent and Acquisition will provide the Company and its counsel in writing with any comments, whether written or oral, Parent, Acquisition 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. 2.2 Company Actions. (a) The Company hereby approves of and consents to the Offer and represents that its Board of Directors, at a meeting duly called and held, acting upon the unanimous recommendation of the special committee of all independent directors (the "Special Committee") of the Board of Directors established pursuant to Section 302A.673(d) of the MBCA on March 22, 1998 has (i) unanimously determined that each of the Agreement, the Offer and the Merger are fair to and in the best interests of the shareholders of the Company, (ii) approved this Agreement and the transactions contemplated hereby, including the Offer and the 8 15 Merger (collectively, the "Transactions"), and such approval constitutes approval of the Offer, this Agreement and the Transactions, including the Merger, for purposes of Section 302A.673 of the MBCA, such that Section 302A.671 of the MBCA will not apply to the Transactions contemplated by this Agreement, and (iii) resolved to recommend that the shareholders of the Company accept the Offer, tender their Company Common Stock thereunder to Acquisition and approve and adopt this Agreement and the Merger; provided, that such recommendation may be withdrawn, modified or amended if, in the good faith opinion of the Board of Directors, based upon the receipt of advice from outside independent legal counsel, failure to withdraw, modify or amend such recommendation would result in the Board of Directors violating its fiduciary duties to the Company's shareholders under applicable Law. (b) Concurrently with the commencement of the Offer, the Company shall file with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9 (together with all amendments and supplements thereto and including the exhibits thereto, the "Schedule 14D-9") which shall, subject to the proviso of Section 2.2(a), contain the recommendation referred to in clause (iii) of Section 2.2(a) hereof. The Schedule 14D-9 will comply in all material respects with the provisions of applicable federal securities laws and, on the date filed with the SEC and on the date first published, sent or given to the Company's shareholders, shall not 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 were made, not misleading, except that no representation is made by the Company with respect to information furnished by Parent or Acquisition for inclusion in the Schedule 14D-9. The Company further agrees to take all steps necessary to cause the Schedule 14D-9 to be filed with the SEC and to be disseminated to holders of Company Common Stock, in each case as and to the extent required by applicable federal securities laws. Each of the Company, on the one hand, and Parent and Acquisition, 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 and 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 Company Common Stock, 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, Acquisition and their counsel with any comments, whether written or oral, that the Company or its counsel may receive 9 16 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 will promptly furnish or cause to be furnished to Acquisition mailing labels, security position listings and any available listing, or computer file containing the names and addresses of all recordholders of Company Common Stock as of a recent date, and shall furnish Acquisition with such additional information (including, but not limited to, updated lists of holders of Company Common Stock and their addresses, mailing labels and lists of security positions) and assistance as the Acquisition or its agents may reasonably request in communicating the Offer to the record and beneficial holders of the Company Common Stock. Except for such steps as are necessary to disseminate the Offer Documents, Parent and Acquisition shall hold in confidence the information contained in any of such labels and lists and the additional information referred to in the preceding sentence, will use such information only in connection with the Offer, and, if this Agreement is terminated, will, upon request of the Company, deliver or cause to be delivered to the Company all copies of such information then in its possession or the possession of its agents or representatives. 2.3 Directors. (a) Promptly upon the purchase of and payment for any Company Common Stock by Parent or any of its subsidiaries which represents at least a majority of the outstanding Company Common Stock (on a fully diluted basis, as defined in Section 2.1(a)), Parent shall be entitled to designate such number of directors, rounded up to the next whole number, on the Board of Directors of the Company as is equal to the next whole number, on the Board of Directors of the Company as is equal to the product of the total number of directors on such Board (giving effect to the directors designated by Parent pursuant to this sentence) multiplied by the percentage that the number of shares of Company Common Stock so accepted for payment bears to the total number of shares of then outstanding. In furtherance thereof, the Company shall, upon request of Acquisition, use its best reasonable efforts promptly either to increase the size of its Board of Directors or secure the resignation of such number of its incumbent directors, or both, as is necessary to enable Parents' designees to be so elected to the Company's Board, and shall take all actions available to the Company to cause Parent's designees to be so elected. At such time, the Company shall, if requested by Parent, also cause persons designated by Parent to constitute at least the same percentage (rounded up to the next whole number) as is on the Company's Board of Directors of each committee of 10 17 the Company's Board of Directors. Notwithstanding the foregoing, the Company shall have at least one independent director until the Effective Time. (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 2.3(a), including mailing to shareholders the information required by such Section 14(f) and Rule 14f-1 as is necessary to enable Parent's designees to be elected to the Company's Board of Directors. Parent or Acquisition will supply the Company and be solely responsible for any information with respect to either of them and their nominees, offices, directors and affiliates required by such Section 14(f) and Rule 14f-1. The provisions of this Section 2.3 are in addition to and shall not limit any rights which the Acquisition, Parent or any of their affiliates may have as a holder or beneficial owner of Company Common Stock as a matter of law with respect to the election of directors or otherwise. 2.4 The Merger. Upon the terms and subject to the conditions of this Agreement and in accordance with the MBCA, at the Effective Time (as defined herein), Acquisition shall be merged with and into the Company, and the Company shall (i) be the surviving corporation in the Merger (in such capacity, the "Surviving Corporation"), (ii) succeed to and assume all the rights and obligations of Acquisition in accordance with the MBCA, and (iii) continue its corporate existence under the laws of the State of Minnesota. The Merger shall have the effect set forth in Section 302A.641 of the MBCA. At the Effective Time, the separate existence of Acquisition shall cease. The Merger shall be pursuant to the provisions of, and shall be with the effect provided in, the MBCA. In accordance with the MBCA, all of the rights, privileges, powers and franchises of the Company and Acquisition shall vest in the Surviving Corporation, and all of the debts, liabilities and duties of the Company and Acquisition shall become the debts, liabilities and duties of the Surviving Corporation. 2.5 Effective Time; Filing of Articles of Merger. The Merger shall be effected by the filing at the time of the Closing (as defined herein) of a properly executed Articles of Merger or other appropriate documents (in the form attached as Exhibit 1 hereto) with the Secretary of State of the State of Minnesota in accordance with the provisions of the MBCA. The Merger shall become effective at the time of such filing of the Articles of Merger with the Secretary of State of the State of Minnesota or at such later date or time as Acquisition and the Company shall agree and as specified in the Articles of Merger (the "Effective Time"). At the Closing, the 11 18 Parent and the Constituent Corporations shall cause a properly executed Articles of Merger to be filed with the Secretary of State of the State of Minnesota as provided in the MBCA, and shall take any and all other lawful actions and do any and all other lawful things to cause the Merger to become effective. 2.6 Articles of Incorporation. At the Effective Time, the Articles of Incorporation of Acquisition as in effect immediately prior to the Effective Time shall be the Articles of Incorporation of the Surviving Corporation until thereafter amended in accordance with its terms and the MBCA. 2.7 By-Laws. The By-laws of Acquisition, as in effect immediately prior to the Effective Time, shall be the By-laws of the Surviving Corporation until thereafter amended in accordance with its terms and the MBCA. 2.8 Directors and Officers. The directors and officers of Acquisition immediately prior to the Effective Time shall be the initial directors and officers of the Surviving Corporation. Each director and officer of the Surviving Corporation shall hold office in accordance with the Articles of Incorporation and By-laws of the Surviving Corporation until his or her successor is duly appointed and qualified. 2.9 Additional Actions. If, at any time after the Effective Time, the Surviving Corporation shall consider or be advised that consistent with the terms of this Agreement any further assignments or assurances in law or any other acts are necessary or desirable (i) to vest, perfect or confirm, of record or otherwise, in the Surviving Corporation, title to and possession of any property or right of either Constituent Corporation acquired or to be acquired by reason of, or as a result of, the Merger, or (ii) otherwise to carry out the purposes of this Agreement, then, subject to the terms and conditions of this Agreement, each such Constituent Corporation and its officers and directors shall be deemed to have granted to the Surviving Corporation an irrevocable power of attorney to execute and deliver all such deeds, assignments and assurances in law and to do all acts necessary or proper to vest, perfect or confirm title to and possession of such property or rights in the Surviving Corporation and otherwise to carry out the purposes of this Agreement; and the officers and directors of the Surviving Corporation are fully authorized in the name of either Constituent Corporation to take any and all such action. 2.10 Time and Place of Closing. The closing of the Merger (the "Closing") shall take place (a) at the offices of Skadden, Arps, Slate, Meagher & Flom (Illinois), 333 West Wacker Drive, Suite 2100, Chicago, Illinois 60606 as soon 12 19 as practicable and no later than the second business day following satisfaction or waiver of all of the conditions set forth in Article 7, or (b) at such other place, at such other time or on such other date as the Parent and the Company may mutually agree (the date of the Closing is hereinafter sometimes referred to as the "Closing Date"). 2.11 Conversion of Company Common Stock. (a) Each share of the Company Common Stock issued and outstanding immediately prior to the Effective Time (except for Dissenting Shares), shall, by virtue of the Merger and without any action on the part of the Company, the Parent, Acquisition or the holder thereof, be converted into the right to receive the Offer Price in cash, payable to the holder thereof, without any interest thereon, as soon as reasonably practicable after the surrender of the certificate(s) representing such Company Common Stock as provided in Section 2.12. (b) Each share of common stock, par value $0.01 per share, of Acquisition issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger and without any action on the part of the holder thereof, be converted into one share of common stock of the Surviving Corporation. Each certificate evidencing ownership of any such shares shall, following the Merger, evidence ownership of the same number of shares of common stock of the Surviving Corporation. (c) Payments in respect of the Existing Options are provided for in Section 2.18 below. 2.12 Exchange of Shares. (a) Prior to the Effective Time, the Company shall appoint a Person that is reasonably acceptable to the Parent to act as the exchange agent hereunder (the "Exchange Agent") to receive in trust the funds which holders of Company Common Stock shall become entitled upon surrender of the certificates for exchange in accordance with this Section 2.12. As soon as reasonably practicable after the Effective Time, the Exchange Agent shall mail to each holder of record of a share certificate which immediately prior to the Effective Time represented outstanding Company Common Stock (other than Parent, the Company, any Subsidiary of Parent and any holder of Dissenting Shares): (1) a letter of transmittal (a "Letter of Transmittal") which shall 13 20 (x) specify that delivery shall be effected, and risk of loss and title to each such certificate shall pass, only upon delivery of such certificates to the Exchange Agent, (y) contain a representation in a form reasonably satisfactory to the Parent as to the good and marketable title to the Company Common Stock held by such holder free and clear of any Lien, and (z) contain such other provisions as the Company and the Parent may reasonably specify; and (2) instructions to effect the surrender of such certificate(s) in exchange for a check in an amount equal to the Offer Price multiplied by the number of shares of Company Common Stock represented by such certificate(s). At the Closing, immediately prior to the Effective Time, Parent shall cause Acquisition to deposit with the Exchange Agent, on behalf of the Shareholders, an aggregate amount in cash equal to the Offer Price times the number of shares of Company Common Stock outstanding as of the Closing (such aggregate amount being hereinafter referred to as the "Exchange Fund"), and then, upon surrender to the Exchange Agent of certificate(s) for cancellation together with a duly executed Letter of Transmittal and such other documents as the Exchange Agent may reasonably require, make payment of the Offer Price provided for in Section 2.11(a) to the holder of such certificate(s) out of the Exchange Fund. The Exchange Agent shall invest portions of the Exchange Fund as Parent directs, provided that substantially all such investments shall be in obligations of or guaranteed by the United States of America, in commercial paper obligations receiving the highest rating from either Moody's Investors Services, Inc. or Standard and Poor's Corporation, or in certificates of deposit, bank repurchase agreements or banker's acceptances of commercial banks with capital exceeding $250 million. The Exchange Fund shall not be used for any other purpose, except as provided in this Agreement. Thereafter (except as otherwise provided for in Section 2.12(c)), each holder of certificate(s) representing Company Common Stock may surrender such certificate(s) to the Exchange Agent and (subject to applicable abandoned property, escheat and similar laws) receive from the Exchange Agent in exchange therefor an amount equal to the product of (x) the Offer Price and (y) the number of shares of Company Common Stock represented by the certificate(s) so surrendered, without interest, but such holder shall have no rights whatsoever against the Surviving Corporation. 14 21 Upon the surrender of any such certificate(s) to the Exchange Agent, the Exchange Agent shall promptly surrender such certificate(s) to the Surviving Corporation for cancellation. (b) If the consideration payable for any Company Common Stock is to be delivered to a person other than the person in whose name the certificate(s) representing such Company Common Stock is registered, it shall be a condition of such delivery that the certificate(s) so surrendered shall be properly endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name of the record holder appears on such certificate, and shall otherwise be in proper form for transfer, and that the person requesting such delivery shall pay to the Exchange Agent or the Surviving Corporation, as the case may be, any transfer or other taxes required by law as a result of such delivery to a person other than the record holder of the certificate(s) surrendered or shall establish to the Exchange Agent's and the Surviving Corporation's reasonable satisfaction that such tax has been paid or is not payable. (c) Any portion of the Exchange Fund delivered upon the Closing Date to the Exchange Agent pursuant to this Agreement that remains unclaimed for one (1) year after the Closing Date shall be delivered by the Exchange Agent to the Surviving Corporation, upon demand, and any Shareholders who have not theretofore complied with Section 2.12(a) shall thereafter look only to the Surviving Corporation for delivery of the Offer Price, subject in all events to all applicable escheat and other similar laws. (d) Until surrender as contemplated by this Section 2.12 of this Agreement, certificate(s) representing Company Common Stock shall be deemed at all times after the Effective Time to represent only the right to receive upon surrender the consideration to be paid therefor as specified in this Agreement. (e) No interest shall accrue or be payable with respect to any amounts which any Shareholder or Optionholder shall be entitled to receive pursuant to this Agreement. The Exchange Agent shall be authorized to pay the Offer Price attributable to any certificate(s) representing Company Common Stock which has been lost or destroyed upon receipt of evidence of ownership of the Company Common Stock represented thereby and of appropriate indemnification and/or bond in each case reasonably satisfactory to the Company or the Surviving Corporation, as the case may be (but no bond shall be required in cases of 25 shares or less). 15 22 (f) Neither the Exchange Agent nor any party to this Agreement shall be liable to any Shareholder or Optionholder for any Company Common Stock, any Existing Options, the Offer Price or cash delivered to a public official pursuant to any abandoned property, escheat or similar law. (g) The Exchange Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any Shareholder or Optionholder such amounts as the Company reasonably determines are required to be deducted and withheld with respect to the making of such payment under the Code, or any provision of state, local or foreign tax Law. To the extent that amounts are so withheld by the Exchange Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the Shareholder or Optionholder in respect of which such deduction and withholding was made by the Exchange Agent. 2.13 No Further Rights or Transfers; Cancellation of Treasury Shares. Except for the surrender of the certificate(s) representing the Company Common Stock in exchange for the right to receive the Offer Price with respect to each share of Company Common Stock or the perfection of appraisal rights with respect to the Dissenting Shares, at and after the Effective Time, the holder of shares of Company Common Stock shall cease to have any rights as a shareholder of the Company, and no transfer of shares of Company Common Stock shall thereafter be made on the stock transfer books of the Surviving Corporation. Each share of Company Common Stock held in the Company's treasury immediately prior to the Effective Time shall, by virtue of the Merger, be canceled and retired and cease to exist without any conversion thereof. 2.14 Dissenters' Rights. Shares of Company Common Stock which immediately prior to the Effective Time are held by Shareholders who have properly exercised and perfected appraisal rights under Section 302A.473 of the MBCA (the "Dissenting Shares") shall, if required by the MBCA, but only to the extent required thereby, not be converted into the right to receive the Offer Price, but the holders of Dissenting Shares shall be entitled to receive such consideration as shall be determined pursuant to Section 302A.473 of the MBCA; provided, however, that if any such holder shall have failed to perfect or shall withdraw or lose his right to appraisal and payment under the MBCA, such holder's shares of Company Common Stock shall thereupon be deemed to have been converted as of the Effective Time into the right to receive the Offer Price, without any interest thereon, and such shares shall no longer be Dissenting Shares. The Company shall give the Parent, Acquisition and 16 23 the Exchange Agent prompt notice of any claim by a Shareholder for payment of fair value for Dissenting Shares as provided in Section 302A.473 of the MBCA. Prior to the Effective Time, the Company will not, except with the prior written consent of Parent and Acquisition, make any payments with respect to, or settle or offer to settle, any such demands. 2.15 Special Meeting of Shareholders. (a) If required by applicable law in order to consummate the Merger, the Company agrees to take all steps necessary to cause a special meeting of the Shareholders (the "Special Meeting") to be duly called, noticed, convened and held as soon as practicable following the acceptance for payment and purchase of shares of Company Common Stock by the Parent or its affiliates pursuant to the Offer for the purpose of voting to approve this Agreement and the Merger. In connection with the Special Meeting, the Board of Directors of the Company, acting upon the unanimous recommendation of the Special Committee, shall unanimously recommend to the Shareholders that the Shareholders vote in favor of the approval of this Agreement and the Merger. (b) In connection with the Special Meeting, the Company agrees to promptly prepare and cause to be filed with the SEC and mailed to the Shareholders a notice of the Special Meeting and a definitive proxy statement (the "Proxy Statement") and shall cause such notice to be mailed no later than the time required by applicable law and the certificate of incorporation and bylaws of the Company. The Parent and Acquisition agree to provide the Company with any information for inclusion in the Proxy Statement (or any amendments or supplements thereto) which is required by applicable law or which is reasonably requested by the Company. The Company shall consult with the Parent and Acquisition with respect to the Proxy Statement (and any amendments or supplements thereto) and shall afford the Parent and Acquisition reasonable opportunity to comment thereon prior to its finalization. If, at any time prior to the Special Meeting, any event shall occur relating to Company or the transactions contemplated by this Agreement which should be set forth in an amendment or a supplement to the Proxy Statement, the Company will promptly notify in writing the Parent and Acquisition of such event. In such case, the Company, with the cooperation of the Parent and Acquisition, will promptly prepare and mail such amendment or supplement and the Company shall consult with the Parent and Acquisition with respect to such amendment or supplement and shall afford the Parent and Acquisition reasonable opportunity to comment thereon prior to such mailing. The Company agrees to notify the Parent 17 24 and Acquisition at least three (3) days prior to the mailing of the Proxy Statement (or any amendment or supplement thereto) to the Shareholders. (c) The Parent agrees that if any event with respect to the Parent, Acquisition or their officers or directors shall occur which is required to be described in an amendment or supplement to the Proxy Statement or any other filing with the Securities and Exchange Commission (the "SEC") that may be required in connection with this Agreement, the Merger and all matters related thereto, the Parent will promptly inform the Company thereof and the Company will cause such event to be so described and such amendment or supplement to be promptly filed with the SEC and, as required by law, disseminated to the Shareholders; provided, however, that prior to such filing or mailing the Company shall consult with the Parent and Acquisition with respect to such amendment, supplement or other filing and shall afford the Parent and Acquisition a reasonable opportunity to comment thereon. 2.16 Merger Without Meeting of Shareholders. Notwithstanding Section 2.15 hereof, in the event that Parent, Acquisition and any other Subsidiaries of Parent shall acquire in the aggregate at least 90% of the class of capital stock of the Company Common Stock, pursuant to the Offer or otherwise, the parties hereto shall, at the request of Parent and subject to Article 7 hereof, take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after such acquisition, without a meeting of shareholders of the Company, in accordance with Section 302A. 621 of the MBCA. 2.17 Commercially Reasonable Efforts. So long as this Agreement has not been terminated, the Company, the Parent and Acquisition shall: (i) promptly make their respective filings and thereafter make any other submissions required under all applicable laws with respect to this Agreement, the Offer, the Merger and the other transactions contemplated hereby and (ii) use their respective commercially reasonable efforts to promptly take, or cause to be taken, all other actions and do, or cause to be done, all other things necessary proper or appropriate to consummate and make effective the Merger as provided for in this Agreement. 2.18 Existing Options. (a) As of the Effective Time, each Existing Option which is outstanding at the Effective Time will be exchanged for, and the holders of each such Existing Option will be entitled to receive at the Closing (or thereafter, if necessary) 18 25 upon surrender of such Existing Option for cancellation, cash equal to (i) the product of (a) the difference between the Offer Price and the exercise price of each such Existing Option, times (b) the number of shares of Company Common Stock covered by such Existing Option. It is presently anticipated by the Company that the payment to be made at the Closing to the Optionholders in respect of the Existing Options will be approximately $6.6 million (before any income taxes and other required withholdings). (b) The Company shall take all actions necessary to ensure that from and after the Effective Time the Surviving Corporation will not be bound by any options, warrants, rights or agreements which would entitle any person, other than Parent or Acquisition, to beneficially own shares of Surviving Corporation or Parent or receive any payments (other than as set forth in (a)) in respect of such options, warrants, rights or agreements. The Company shall take all actions necessary to terminate each plan with respect to Existing Options as of the Effective Time. ARTICLE 3 OTHER AGREEMENTS 3.1 Access. Subject to the provisions of the Confidentiality Agreement referred to in Section 3.6 below, and so long as this Agreement has not been terminated as herein provided, upon reasonable request, the Company shall grant to the Parent, Acquisition and their agents, accountants, attorneys and other advisers reasonable access during normal business hours to all of the properties, facilities, books, records, financial statements and other documents and materials relating to its financial condition, assets, liabilities and business, including, without limitation, permitting the Parent (at its expense and subject to the prior approval of the Company, which approval shall not be unreasonably withheld) to: (a) conduct appraisals of the Equipment, Buildings, Real Estate and other properties of the Company; and (b) conduct an environmental and occupational safety inspection of the properties of the Company. In addition, the Company shall confer and consult with representatives of the Parent, as the Parent may reasonably request, to report on operational matters, financial matters and the general status of ongoing business operations of the Company. 19 26 3.2 Disclosure Letter. The Company has delivered to the Parent a disclosure letter (the "Disclosure Letter") which shall be signed by the President and the Secretary of the Company stating that the Disclosure Letter was delivered pursuant to this Agreement and is the Disclosure Letter referred to in this Agreement. The Disclosure Letter is deemed to constitute an integral part of this Agreement and to modify, as specified, the representations, warranties, covenants or agreements of the Company contained in this Agreement. 3.3 Deliveries of Information. From time to time after the date of this Agreement and prior to the Closing Date (unless this Agreement is terminated), the Company shall furnish promptly to the Parent: (a) a copy of each report, schedule and other document filed by the Company or received by the Company after the date of this Agreement pursuant to the requirements of federal or state securities Laws promptly after such documents are available; and (b) the monthly financial statements of the Company (as prepared by the Company in accordance with its normal accounting procedures) promptly after such financial statements are available. 3.4 Acquisition Proposals. (a) Prior to the Effective Time, the Company agrees that neither it, any of its Affiliates, nor any of the respective directors, officers, employees, agents or representatives of the foregoing, will, directly or indirectly, (i) solicit, initiate, facilitate or encourage (including by way of furnishing or disclosing non-public information) any inquiries or the making of any proposal with respect to any merger, consolidation or other business combination involving the Company or the acquisition of all or any significant part of the assets or capital stock of the Company (an "Acquisition Transaction") or (ii) negotiate, explore or otherwise engage in discussions with any Person (other than the Parent and its representatives) with respect to any Acquisition Transaction, or which may reasonably be expected to lead to a proposal for an Acquisition Transaction or enter into any agreement, arrangement or understanding with respect to any such Acquisition Transaction or which would require it to abandon, terminate or fail to consummate the Merger or any other transaction contemplated by this Agreement; provided, however, that the Company may, in response to an unsolicited written proposal from a third party regarding a Superior Proposal (as hereinafter defined), furnish information to and 20 27 engage in discussions and negotiations with such third party, but only if the Board of Directors of the Company determines in good faith, after consultation with its financial advisors and based upon the advice of outside independent counsel, that failing to take such action would result in a breach of the fiduciary duties of such Board of Directors under applicable Law. It is understood and agreed, without limitation of the Company's obligations, that any violation of this Section 3.4 by any director, officer, Affiliate, investment banker, financial advisor, attorney or other advisor or representative of the Company, whether or not such Person is purporting to act on behalf of the Company, or otherwise, shall be deemed to be a breach of this Section 3.4 by the Company. (b) The Company agrees that, as of the date hereof, it, its Affiliates, and the respective directors, officers, employees, agents and representatives of the foregoing, shall immediately cease and cause to be terminated any existing activities, discussions or negotiations with any Person (other than the Parent and its representatives) conducted heretofore with respect to any Acquisition Transaction. The Company agrees to promptly advise the Parent in writing of the existence of (x) any inquiries or proposals (or desire to make a proposal) received by (or indicated to) after the date hereof, any such information requested from, or any negotiations or discussions sought to be initiated or continued with, the Company, its Affiliates, or any of the respective directors, officers, employees, agents or representatives of the foregoing, in each case from a Person (other than the Parent and its representatives) with respect to an Acquisition Transaction, and (y) the terms thereof, including the identity of such third party and the terms of any financing arrangement or commitment in connection with such Acquisition Transaction, and to update on an ongoing basis or upon the Parent's reasonable request, the status thereof. As used herein, "Superior Proposal" means a bona fide, written and unsolicited proposal or offer made by any Person (or group) (other than the Parent or any of its Subsidiaries) with respect to an Acquisition Transaction on terms which, as determined by the Board of Directors of the Company in good faith and in the exercise of reasonable judgment (based on the advice of independent financial advisors and Katten Muchin & Zavis or outside independent Minnesota counsel), would reasonably be likely to be more favorable to the Company and its Shareholders than the transactions contemplated hereby. 3.5 Public Announcements. Any public announcement made by or on behalf of either the Parent or the Company prior to the termination of this Agreement pursuant to Article 9 hereof concerning this Agreement, the transactions described herein or any other aspect of the dealings heretofore had or hereafter to be 21 28 had between the Company and the Parent and their respective Affiliates must first be approved by the other party (any such approval not to be unreasonably withheld), subject to either party's obligations under applicable Law (but such party shall use its best efforts to consult with the other party as to all such public announcements). 3.6 Confidentiality Agreement. The Company and the Parent agree that the Confidentiality Agreement entered into between the Company and the Parent, dated March 2, 1998, remains in effect, but shall at the Effective Time be deemed to have terminated without further action by the parties. 3.7 Regulatory and Other Approvals. (a) Subject to the terms and conditions herein provided, the Company will (i) take all reasonable steps necessary or desirable, and proceed diligently and in good faith and use all reasonable efforts to obtain all approvals required by any Contract to consummate the transactions contemplated hereby, (ii) take all reasonable steps necessary or desirable, and proceed diligently and in good faith and use all reasonable efforts to obtain all approvals, authorizations, and clearances of governmental and regulatory authorities required of the Company to permit the Company to consummate the transactions contemplated hereby, (iii) provide such other information and communications to such governmental and regulatory authorities as such authorities may reasonably request, and (iv) cooperate with Parent in obtaining all approvals, authorizations, and clearances of governmental or regulatory authorities and others required of Parent to consummate the transactions contemplated hereby. (b) The Company and Parent will (i) take all reasonable actions necessary to file as soon as practicable, notifications under the HSR Act, (ii) comply at the earliest practicable date with any request for additional information received from the Federal Trade Commission or Antitrust Division of the Department of Justice pursuant to the HSR Act, and (iii) request early termination of the applicable waiting period. ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 22 29 The Company hereby represents and warrants to the Parent and Acquisition on the date of this Agreement that: 4.1 Organization; Business. (a) Organization. The Company is a corporation duly and validly organized and existing under the Laws of the State of Minnesota, is qualified to do business as a foreign corporation, is in good standing in the Existing Corporate Jurisdictions. The Existing Corporate Jurisdictions (as applicable) constitute all jurisdictions where the ownership or leasing of property or the conduct of its business requires qualification as a foreign corporation by the Company and where the failure to so qualify would have a Material Adverse Effect. The Company is not in violation of any provision of its Articles of Incorporation, By-laws or equivalent organizational documents. (b) Powers. The Company has all requisite corporate power and authority to carry on its business as it is now conducted and to own, lease and operate its assets and properties unless the absence of same would not have a Material Adverse Effect. 4.2 Capitalization. (a) Capital Stock. The entire authorized capital stock of the Company consists of 10,000,000 shares of common stock, no par value, of which 3,893,791 shares are issued and outstanding as of the date hereof. No shares are held by the Company as treasury shares and no shares of the Company Common Stock have been acquired by the Company that are subject to outstanding pledges to secure the future payment of the purchase price therefor. (b) Issuance; Ownership. All of the outstanding capital stock of the Company is duly authorized, validly issued, fully paid and nonassessable and was not issued in violation of any preemptive rights. Other than as disclosed in the Company SEC Documents, the Company does not own, directly or indirectly, any capital stock or other ownership interest in any corporation, partnership, trust, limited liability company or other entity. The Company has no Subsidiaries. Except for the Existing Options, there are no options, warrants, conversion rights or other rights to subscribe for or purchase, or other contracts with respect to, any capital stock of the Company and there are no outstanding or authorized stock appreciation, phantom stock, profit participation, or similar rights with respect to the Company. Except as 23 30 set forth in this Agreement, to the knowledge of the Company, there are no voting trusts, proxies, or other agreements or understandings with respect to the voting of the capital stock of the Company. (c) As of the date of this Agreement, (i) no bonds, debentures, notes or other indebtedness having the right to vote under ordinary circumstances (or convertible into securities having such right to vote) ("Voting Debt") of the Company are issued or outstanding, and (ii) there are no outstanding contractual obligations of the Company to repurchase, redeem or otherwise acquire any shares of capital stock of the Company or any rights. 4.3 Authorization; Enforceability. (a) The execution, delivery and performance of this Agreement are within the corporate power and authority of the Company and, subject to the provisions hereof, have been duly authorized by the Board of Directors of the Company. Except for the approval of the Shareholders as required by Law, the Charter Documents and described in Section 4.22 hereof, no other corporate proceeding or action on the part of the Company is necessary to authorize the execution and delivery by the Company of this Agreement and the consummation by it of the transactions contemplated hereby. This Agreement is, and the other documents and instruments required by this Agreement to be executed and delivered by the Company will be, when executed and delivered by the Company, the valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms, except as the enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws generally affecting the rights of creditors and subject to general equity principles. (b) Prior to execution and delivery of this Agreement, the Board of Directors of the Company and the Special Committee have each (at a meeting duly called and held) unanimously (i) approved the Transactions contemplated hereby, and such approval is sufficient to render the provisions of Section 302.671 of the MBCA inapplicable to the Merger, (ii) determined that the Transactions contemplated hereby are fair to and in the best interests of the holders of the Company Common Stock and (iii) resolved to recommend that the shareholders of the Company accept the Offer, tender their Company Common Stock thereunder to Acquisition and approve and adopt this Agreement. 24 31 (c) No other state takeover statute or similar statute or regulation in any jurisdiction in which the Company does business applies or purports to apply to the Merger or to this Agreement, or any of the transactions contemplated hereby or thereby. 4.4 No Violation or Conflict. Subject to the receipt of the approvals and consents, if any, described in Section 7.1(a) of this Agreement, the execution and delivery of this Agreement and all documents and instruments required by this Agreement to be executed and delivered by the Company do not, and the consummation of the transactions contemplated hereby and compliance with the provisions hereof will not, (i) except as disclosed in the Disclosure Letter, 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 Contract or to the loss of a material benefit under any Contract, or result in the creation of any Lien upon any of the properties or assets of the Company, (ii) conflict or result in any violation of any provision of the Certificate of Incorporation or By-Laws or other equivalent organizational document, in each case as amended, of the Company, (iii) violate any Existing Permits or any Law applicable to the Company or any of their respective properties or assets, other than, in the case of clauses (i) and (iii), any such violations, defaults, rights, losses or Liens that, individually or in the aggregate, would not have a Material Adverse Effect or would not affect adversely the ability of the Company to consummate the Merger and the other transactions contemplated by this Agreement. 4.5 Title to Assets. The Company owns fee simple or valid leasehold (as the case may be) title to the Real Estate and has valid title to its other tangible assets and properties which it owns, free and clear of any and all Liens, except for the Permitted Liens. 4.6 Litigation. (a) There are no actions, suits, claims, worker's compensation claims, litigation or other governmental or judicial proceedings or investigations, arbitrations and product warranty claims against the Company or any of its properties, assets or business, or, to the knowledge of the Company and if and to the extent the Company is, through indemnity or otherwise, liable therefor, any of the Company's current or former directors or officers or any other Person whom the Company has agreed to indemnify, as such, that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect; (b) as of the date hereof, there are no such actions, suits or proceedings pending or, to the knowledge of the Company, threatened, against the Company by any Person which question the 25 32 legality or validity of the transactions contemplated by this Agreement; and (c) there are no outstanding orders, judgments, injunctions, awards or decrees of any Governmental Entity against the Company, any of its or its properties, assets or business, or, to the knowledge of the Company, any of the Company's current or former directors or officers or any other person whom the Company has agreed to indemnify, as such, that could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect. 4.7 Books and Records; Company Financial Statements. (a) Audited Company Financial Statements. The Company Financial Statements comply in all material respects with the applicable accounting requirements and the published rules and regulations of the SEC with respect thereto, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis by the Company during the periods involved (except as may be indicated therein or in the notes thereto (which are subject to completion)). The Company Financial Statements fairly present the financial position of the Company as of the date set forth on each of such Company Financial Statements and the results of operations of the Company for the periods indicated on each of the Company Financial Statements. The draft financial statements for the year ended January 31, 1998, which have been provided to Parent, have been prepared in accordance with generally accepted accounting principles applied on a consistent basis by the Company during the periods involved (except as may be indicated therein or in the notes thereto) and fairly present the financial position of the Company as of January 31, 1998. (b) Unaudited Company Financial Statements. Those financial statements which are unaudited and contained in the Company SEC Documents fairly present in all material respects the financial position of the Company as of the date set forth on each of such financial statements and the results of operations and cash flows of the Company for the periods indicated on each of such financial statements in accordance with generally accepted accounting principles consistently applied by the Company except that such financial statements do not reflect normal year-end adjustments and do not contain footnotes. (c) Accounting Records. The accounting books and records of the Company: (i) are in all material respects correct and complete; (ii) are current in a manner consistent with past practice; and (iii) to the knowledge of the Company, have recorded therein all the properties, assets and liabilities of the Company (except 26 33 where the failure to so record would not violate generally accepted accounting principles as consistently applied by the Company). 4.8 Absence of Certain Changes. (a) To the knowledge of the Company, since January 31, 1998 there has not been any: (i) Material Adverse Effect; (ii) transactions by the Company outside the ordinary course of business of the Company, except for the transactions contemplated by this Agreement; (iii) declaration or payment of any dividend or any distribution in respect of the capital stock of the Company or any direct or indirect redemption, purchase or other acquisition of any such stock by the Company; or (iv) payments or distributions, other than normal salaries, to the Shareholders as such or, except for transactions in the ordinary course of business upon commercially reasonable terms of the Company, any Affiliate of the Company. (b) Except as disclosed in the Disclosure Letter, without limiting the generality of the foregoing, since January 31, 1998: (i) the Company has not sold, leased, transferred, or assigned any of its material assets, tangible or intangible, other than for a fair consideration in the ordinary course of business and other than the disposition of obsolete or unusable property; (ii) the Company has not made any capital expenditure (or series of related capital expenditures) either involving more than $50,000 (unless such expenditure is identified in the current business plan of the Company as disclosed to Parent) or outside the ordinary course of business; 27 34 (iii) the Company has not experienced any material damage, destruction, or loss (whether or not covered by insurance) from fire or other casualty to its tangible property; (iv) the Company has not materially increased the base salary of any officer or employee of the Company, or adopted, amended, modified, or terminated any bonus, profit-sharing, incentive, severance, or other similar plan for the benefit of any of its directors, officers or employees; and (v) the Company has not entered into a binding commitment to any of the foregoing. 4.9 Buildings and Equipment. The Company has not received any written notice from any governmental authority that any of the Buildings or Equipment fail to comply with any applicable building and zoning or other similar Laws in effect at the date hereof which notice is still outstanding; and the continuation of the Company Business as currently conducted will not result in the enforcement or the threat of enforcement of any such Laws, except where such enforcement or threat of enforcement would not result in a Material Adverse Effect. 4.10 Performance of Contracts. Each of the Contracts is in full force and effect and constitutes the legal and binding obligation of the Company and, to the knowledge of the Company, constitutes the legal and binding obligation of the other parties thereto. Except as disclosed in the Disclosure Letter, there are no existing breaches or defaults by the Company or, to the knowledge of the Company, any other party to a Contract under any Contract the effect of which would constitute a Material Adverse Effect and, to the knowledge of the Company, no event has occurred which, with the passage of time or the giving of notice or both, could reasonably be expected to constitute such a breach or default. To the knowledge of the Company, the Existing Insurance Policies are in full force and effect and the Company has not received notice of any cancellation or threat of cancellation of such insurance. 4.11 Employee Benefit Plans. (a) Existing Plans. Except as previously delivered to Parent, neither the Company nor any Company ERISA Affiliate (defined below) maintains 28 35 or contributes to, nor is it bound by, nor has it maintained or contributed to at any time during the six (6) years prior to the date hereof any Employee Benefit Plan. All of the Existing Plans that are subject to ERISA or the Code are in compliance in all material respects with ERISA and the Code. All of the Existing Plans which are intended to meet the requirements of Section 401(a) of the Code have been determined by the Internal Revenue Service to be "qualified" within the meaning of the Code or have been filed with the Internal Revenue Service with a request for a determination letter on or prior to the end of the applicable remedial amendment period and, to the knowledge of the Company, there are no facts which would adversely affect the tax qualified status of any of the Existing Plans. "Company ERISA Affiliate" shall mean any Person which together with the Company would be deemed a "single employer" within the meaning of Section 4001 of ERISA. (b) ERISA; Code. There is no accumulated funding deficiency, within the meaning of Section 302 of ERISA or Section 412 of the Code, in connection with the Existing Plans. No reportable event, as defined in ERISA (other than reportable events for which the 30-day notice requirement has been waived), has occurred in connection with the Existing Plans since January 1, 1995. The Existing Plans have not, nor has any trustee or administrator with respect to the Existing Plans, engaged in any non-exempt prohibited transaction as defined in ERISA or the Code. Neither the Company nor a Company ERISA Affiliate is contributing to, and nor has it any material liability with respect to, any multi-employer plan, as defined in ERISA. (c) Compliance. Neither the Company nor any Company ERISA Affiliate has incurred, directly or indirectly, any material liability to or on account of an Existing Plan pursuant to Title IV of ERISA; no proceedings have been instituted to terminate any Existing Plan that is subject to Title IV of ERISA; and, to the knowledge of the Company, no condition exists that presents a material risk to the Company or any Company ERISA Affiliate of incurring a liability to or on account of a Existing Plan pursuant to Title IV of ERISA. (d) Funding. The current value of the assets of each of the Existing Plans that is subject to Title IV of ERISA exceeds the present value of the accrued benefits under each such Existing Plan, based upon the actuarial assumptions (to the extent reasonable) presently used for funding purposes in the most recent actuarial report prepared by such Existing Plan's actuary with respect to such Existing Plan; and all contributions or other amounts payable by the Company as of the Effective Time with respect to each Existing Plan in respect of current or prior 29 36 plan years have been either paid or accrued on the balance sheet of the Company. There are no material pending or, to the knowledge of the Company, threatened or anticipated claims (other than routine claims for benefits) by, on behalf of or against any of the Existing Plans or any trusts related thereto. (e) Other Plan Obligations. To the knowledge of the Company, neither the Company nor any Company ERISA Affiliate, nor any Existing Plan, nor any trust created thereunder, nor any trustee or administrator thereof has engaged in a transaction in connection with which the Company or any Company ERISA Affiliate, any Existing Plan, any such trust, or any trustee or administrator thereof, or any party dealing with any Existing Plan or any such trust could be subject to either a civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax imposed pursuant to Section 4975 or 4976 of the Code. No Existing Plan provides death or medical benefits (whether or not insured), with respect to current or former employees of the Company or any Company ERISA Affiliate beyond their retirement or other termination of service other than (i) coverage mandated by applicable Law or (ii) death benefits under any "employee pension plan," as that term is defined in Section 3(2) of ERISA. 4.12 Brokers. Except for Wasserstein Perella & Co., Inc., the Company has not incurred any brokers', finders' or any similar fee in connection with the transactions contemplated by this Agreement. A true, correct and complete copy of the engagement letter or other agreement between the Company and Wasserstein Perella & Co., Inc. has been made available to Acquisition. 4.13 Taxes. (a) Tax Returns. For all years for which the applicable statutory period of limitation has not expired, the Company has timely and properly filed, and will through the Closing Date timely and properly file, all material federal, state, local and foreign tax returns (including but not limited to income, franchise, sales, payroll, employee withholding and social security and unemployment) which were or will be required to be filed. The Company has paid all taxes (including interest and penalties) and withholding amounts owed by the Company except where the failure to do so would not cause a Material Adverse Effect. No tax deficiencies have been proposed or assessed against the Company. To the knowledge of the Company, no issue has been raised in any prior tax audit of the Company which, by application of the same or similar principles, could reasonably be expected upon a future tax audit of the Company to result in a proposed deficiency for any period and 30 37 which deficiency would have a Material Adverse Effect. The Company is not liable for any taxes attributable to any other Person, whether by reason of being a member of another affiliated group, being a party to a tax sharing agreement, as a transferee or successor, or otherwise. (b) Audits. The Company has not consented to any extension of the statute of limitation with respect to any open federal, state or local tax returns. (c) Liens. There are no tax Liens upon any property or assets of the Company except for Liens for current taxes not yet due and payable. (d) Deliveries. The Company has delivered to the Parent correct and complete copies of all tax returns and reports of the Company filed for all periods not barred by the applicable statute of limitations through the Effective Time. No examination or audit of any tax return or report for any period not barred by the applicable statute of limitations has occurred, no such examination is in progress and, to the knowledge of the Company, no such examination or audit is planned. (e) Withholding Taxes. The Company has properly withheld and timely paid substantially all withholding and employment taxes which it was required to withhold and pay relating to salaries, compensation and other amounts heretofore paid to its employees or other Persons. All Forms W-2 and 1099 required to be filed with respect thereto have been timely and properly filed except where the failure to file would not have a Material Adverse Effect. (f) Other Representations. The Company has not and will not make any elections under Section 341(f) of the Code and, except as shown in the Disclosure Letter, has and will not be subject to Section 280G of the Code. 4.14 Real Estate. The Real Estate: (a) constitutes all real property and improvements leased or owned by the Company; and (b) is not subject to any leases, tenancies, encumbrances or encroachments of any kind except for Permitted Liens. 4.15 Governmental Approvals. No permission, approval, determination, consent or waiver by, or any declaration, filing or registration with, any federal, state, local or foreign court, arbitral tribunal, administrative agency or commission or other governmental or regulatory authority or administrative agency (a "Governmental Entity") is required by the Company in connection with the 31 38 execution and delivery of this Agreement by the Company or the consummation by the Company of the Merger, except for: (a) the approvals described in Section 7.1(a) of this Agreement; and (b) the filing of the Articles of Merger as described in this Agreement. 4.16 No Pending Acquisitions. Except for this Agreement and previously executed confidentiality agreements, the Company is not a party to or bound by any agreement, undertaking or commitment with respect to an Acquisition Transaction. 4.17 Labor Matters. (a) Employment Claims. To the knowledge of the Company, there is no present or former employee of the Company who has any material claim against the Company (whether under Law, under any employee agreement or otherwise) on account of or for: (i) overtime pay, other than overtime pay for the current payroll period; (ii) wages or salaries, other than wages or salaries for the current payroll period; or (iii) vacations, sick leave, time off or pay in lieu of vacation or time off, other than vacation, sick leave or time off (or pay in lieu thereof) earned in the period immediately preceding the date of this Agreement or incurred in the ordinary course of business and appearing as a liability on the most recent Company Financial Statements. (b) Labor Disputes. (i) There are no pending and unresolved material claims by any Person against the Company arising out of any statute, ordinance or regulation relating to unfair labor practices, discrimination or to employees or employee practices or occupational or safety and health standards; (ii) there is no pending, nor has the Company experienced since January 31, 1995 any, material labor dispute, strike or organized work stoppage; and (iii) to the knowledge of the Company, there is no threatened material labor dispute, strike or organized work stoppage against the Company. (c) Union Matters. (i) To the knowledge of the Company, no union organizing activities are in process or have been proposed or threatened involving any employees of the Company; and (ii) no petitions have been filed or, to the knowledge of the Company, have been threatened or proposed to be filed, for union organization or representation of employees of the Company not presently organized. 32 39 4.18 Existing Permits and Violations of Law. The Existing Permits constitute all licenses, permits, approvals, exemptions, orders, approvals, franchises, qualifications, permissions, agreements and governmental authorizations required by Law which the Company currently has and is required to have for the conduct of the business of the Company as currently conducted, except where the failure to have the same would not have a Material Adverse Effect. No action or proceeding is pending or, to the knowledge of the Company, threatened that is reasonably likely to result in a revocation, non-renewal, termination, suspension or other material impairment of any material Existing Permits. The business of the Company is not being conducted in violation of any applicable Law, except for such violations which would not have a Material Adverse Effect. No Governmental Entity has indicated to the Company an intention to conduct an investigation or review with respect to the Company other than, in each case, those which would not have a Material Adverse Effect. 4.19 Intangible Assets. (a) Claims. (i) There are no material claims, demands or proceedings instituted, pending or, to the knowledge of the Company, threatened by any Person contesting or challenging the right of the Company to use any of its Intangible Assets; (ii) each trademark registration, service mark registration, copyright registration and patent which is owned by or licensed to the Company and, with respect to those owned by the Company, has been maintained in good standing and, with respect to those licensed to the Company, to the Company's knowledge, has been maintained in good standing except where the failure to so maintain would not have a Material Adverse Effect; (iii) there are no Intangible Assets owned by a Person which the Company is using without license to do so, except where the failure to possess such license could not reasonably be expected to have a Material Adverse Effect; (iv) the Company owns or possesses adequate licenses or other rights to use all Intangible Assets necessary to conduct its business as now conducted, except where the failure to possess such licenses could not reasonably be expected to have a Material Adverse Effect; and (v) the consummation of the Merger and the transactions contemplated by this Agreement will not impair the validity, enforceability, ownership or right of the Company to use its Intangible Assets except, in each case, where the impairment would not have a Material Adverse Effect. 4.20 Customers and Suppliers. Since January 31, 1997, there has been no termination, cancellation or material curtailment of the business relationship of the Company with any customer or supplier or group of affiliated customers or 33 40 suppliers which would result in a Material Adverse Effect nor, to the knowledge of the Company, any notice of intent to so terminate, cancel or materially curtail. 4.21 Environmental Protection. (a) Definitions. As used in this Agreement: (i) "Environmental Claim" shall mean any and all administrative, regulatory or judicial actions, suits, demands, demand letters, directives, claims, Liens investigations, proceedings or notices of noncompliance or violation (written or oral) by any Person alleging liability (including, without limitation, liability for enforcement, investigatory costs, cleanup costs, governmental response costs, removal costs, remedial costs, natural resources damages, property damages, personal injuries, or penalties) arising out of, based on or resulting from: (A) the presence or environmental release of any Hazardous Materials at any parcel of real property; or (B) circumstances forming the basis of any violation or alleged violation, of any Environmental Law; or (C) any and all claims by any Person seeking damages, contribution, indemnification, cost, recovery, compensation or injunctive relief resulting from the presence or Environmental Release of any Hazardous Materials. (ii) "Hazardous Materials" shall mean: (A) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, and transformers or other equipment that contain dielectric fluid containing polychlorinated biphenyls ("PCBs") above regulated levels and radon gas; and (B) any chemicals, materials or substances which are now defined as or included in the definition of "hazardous substances," "hazardous wastes," "hazardous materials," "extremely hazardous wastes," "restricted hazardous wastes," "toxic substances," "toxic pollutants," or words of similar import, under any Environmental Law; and (C) any other chemical, material, substance or waste, exposure to which is now prohibited, limited or regulated by any governmental authority. (iii) "Environmental Laws" shall mean any federal, state, local or foreign statute, Law, rule, ordinance, code, 34 41 policy, rule of common law and regulations relating to pollution or protection of human health (excluding OSHA) 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 Environmental Releases or threatened Environmental Releases of Hazardous Materials, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials. (iv) "Environmental Release" shall mean any release, spill, emission, leaking, injection, deposit, disposal, discharge, dispersal, leaching or migration into the atmosphere, soil, surface water or groundwater. Except for violations of Sections (b), (c), (d) and (e) which would not cause a Material Adverse Effect: (b) Environmental Laws. The Company: (i) is in compliance with all applicable Environmental Laws; and (ii) has not received any communication (written or oral), from a governmental authority or third party that alleges that the Company or any current or former Affiliate of the Company is not in compliance with applicable Environmental Laws. (c) Environmental Permits. The Company has obtained all environmental, health and safety permits and governmental authorizations (collectively, the "Environmental Permits") required for its operations, and all such permits are in good standing and the Company is in substantial compliance with all terms and conditions of the Environmental Permits. (d) Claims. There is no Environmental Claim pending or, to the knowledge of the Company, threatened against the Company or any current or former Affiliate of the Company (to the extent such Environmental Claim relates to the Company) or against any Person whose liability for any Environmental Claim the Company has retained or assumed either contractually or by operation of Law, or against any real or personal property or operations which the Company owns, operates, leases, manages or controls or, to the knowledge of the Company, which the Company owned, operated, leased, managed or controlled. 35 42 (e) Environmental Releases. There have been no Environmental Releases of any Hazardous Material by the Company or any current or former Affiliate of the Company on any parcel of real property or, to the knowledge of the Company, by any Person on, beneath or adjacent to any parcel of real property which the Company or any current or former Affiliate of the Company owned, leased, operated, managed or controlled. (f) CERCLA. The Company has not received any written notice of potential liability from any Person under or relating to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended ("CERCLA"), or any similar state or local Law. (g) Reports. The Company will make available for inspection to Parent true, complete and correct copies and results of any reports, studies, analyses, tests or monitoring possessed by the Company pertaining to Hazardous Materials in, on, beneath or adjacent to any property currently or formerly owned, operated or leased by the Company or any current or former Affiliate of the Company, or regarding the Company's compliance with applicable Environmental Laws. (h) Tanks. The Real Estate does not contain any underground storage tanks which contained or contain any Hazardous Material. 4.22 Vote Required. The affirmative vote of the holders of at least a majority of the outstanding shares of Company Common Stock entitled to vote with respect to the Merger is the only vote of the holders of any class or series of the Company's capital stock necessary to approve the Merger, this Agreement and the transactions contemplated hereby. 4.23 Returns. As of the date of this Agreement, to the knowledge of the Company, there are no known claims against the Company to return in excess of $50,000 (after giving effect to and exhausting any applicable reserves and/or accruals therefor contained in the Company Financial Statements) of merchandise by reason of alleged overshipments, defective merchandise or otherwise, or of merchandise in the hands of customers under an understanding that such merchandise would be returnable for credit. To the knowledge of the Company, there is no reasonable basis for claims against the Company to return in excess of $50,000 (after giving effect to and exhausting any applicable reserves and/or accruals therefor contained in the 36 43 Company Financial Statements) if the Company's finished good inventories were sold to the intended customer therefor. 4.24 SEC Reports. The Company has filed with the SEC, and has heretofore made available to the Parent true and complete copies of, all forms, reports, schedules, statements and other documents required to be filed by it since January 31, 1995 under the Exchange Act or the Securities Act of 1933, as amended, and the rules and regulations thereunder (collectively, the "Securities Act") (as such documents have been amended since the time of their filing, collectively, the "Company SEC Documents"). As of their respective dates or, if amended, as of the date of the last such amendment, the Company SEC Documents, including, without limitation, any financial statements or schedules included therein (a) did not contain any untrue statement of a material fact or omit 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 and (b) complied in all material respects with the applicable requirements of the Exchange Act and the Securities Act, as the case may be, and the applicable rules and regulations of the SEC thereunder at such time of filing. 4.25 Content of Proxy Statement. The Proxy Statement, if any (or any amendment thereof or supplement thereto), will, at the date mailed to Company shareholders and at the time of the meeting of Company shareholders to be held in connection with the Merger, not 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, except that no representation is made by the Company with respect to statements made therein based on information supplied by Parent or Acquisition for inclusion in the Proxy Statement. The Proxy Statement will comply in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. 4.26 Opinion of Financial Advisor. The Company has received the opinion of Wasserstein Perella & Co., Inc., its financial advisor, to the effect that, as of March 22, 1998, the cash consideration to be received in the Offer and the Merger, based upon and subject to the assumptions and limitations set forth in such opinion, by the Company 's shareholders is fair to such shareholders from a financial point of view, a copy of which opinion has been delivered to Parent. 37 44 4.27 Certain Agreements. Except as set forth in the Disclosure Letter, the Company is not a party to any oral or written Agreement or plan, including any stock option plan, stock appreciation rights plan, restricted stock plan or stock purchase plan, any of the benefits of which will be increased, or the vesting of the benefits of which will be accelerated, by the occurrence of any of the transactions contemplated by this Agreement or the value of any of the benefits of which will be calculated on the basis of any of the transactions contemplated by this Agreement. Except as described in the Disclosure Letter, the transactions contemplated by this Agreement will not constitute a "change of control" under, require the consent from or the giving of notice to any third party pursuant to, or accelerate the vesting or repurchase rights under, the terms, conditions or provisions of any loan or credit agreement, note, bond, mortgage, indenture, license, lease, contract, Agreement or other instrument or obligation to which the Company is a party or by which any of them or any of their properties or assets may be bound. There are no amounts payable by the Company to any officers of the Company (in their capacity as officers) as a result of the transactions contemplated by this Agreement. 4.28 Rights Agreement. The Company has taken all action which may be necessary under the Rights Agreement, dated February 27, 1998, between the Company and Norwest Bank Minnesota, N.A., as agent (the "Rights Agreement"), so that the execution of this Agreement and any amendments thereto by the parties hereto and the execution of one or both of the Tender and Option Agreements and the consummation of the transactions contemplated hereby and thereby shall not cause (i) Parent and/or Acquisition or their respective Affiliates or Associates to become an Acquiring Person (as such terms are defined in the Rights Agreement) unless this Agreement or one or both of the Tender and Option Agreements have been terminated in accordance with their respective terms or (ii) a Distribution Date, a Shares Acquisition Date or a Triggering Event (as such terms are defined in the Rights Agreement) to occur, irrespective of the number of shares of Company Common Stock acquired pursuant to the Offer, the Merger or other transactions contemplated by the Merger Agreement or either of the Tender and Option Agreements. 38 45 ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE PARENT AND ACQUISITION The Parent and Acquisition represent and warrant to the Company as follows: 5.1 Due Incorporation and Authority. Each of the Parent and Acquisition is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and has all requisite corporate power and authority to own, lease and operate its assets and business and to carry on its business as now being and as heretofore conducted. Each of the Parent and Acquisition has all requisite corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the Merger. The execution, delivery and performance by each of the Parent and Acquisition of this Agreement and, subject to the provisions hereof, all of the documents and instruments required by this Agreement to be executed and delivered by the Parent and/or Acquisition, and the consummation by Acquisition of the Merger, have been duly authorized by all the shareholders of Acquisition and the Board of Directors of the Parent and Acquisition as required by Law and the organizational documents of each such entity, and no other corporate proceedings on the part of the Parent or Acquisition will be necessary to authorize the execution, delivery and performance by each of the Parent and Acquisition of this Agreement, or the consummation by Acquisition and Parent of the transactions contemplated hereby. This Agreement is (and each of the documents and instruments required by this Agreement to be executed and delivered by the Parent and/or Acquisition will be, when executed and delivered by the Parent and/or Acquisition) the valid and binding obligations of the Parent and Acquisition, as the case may be, enforceable against the Parent and Acquisition, as the case may be, in accordance with their respective terms, except as the enforcement thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws generally affecting the rights of creditors and subject to general equity principles. 5.2 Consents and Approvals. The execution and delivery by each of the Parent and Acquisition of this Agreement and all documents and instruments required by this Agreement to be executed and delivered by the Parent and/or Acquisition, and the performance by each of the Parent and Acquisition of its obligations hereunder and thereunder do not require the Parent or Acquisition to 39 46 obtain any consent, approval or action of, or make any filing with or give any notice to, any person or any governmental or regulatory body, except (i) compliance with applicable requirements of the HSR Act and (ii) the filing and recordation of appropriate merger documents as required by the MBCA. 5.3 No Broker's, Finder's or Similar Fees. There are no brokerage commissions, finder's fees or similar fees or commissions payable in connection with the transactions contemplated hereby based on any agreement, arrangement or understanding with the Parent and/or Acquisition, or any action taken by the Parent and/or Acquisition. 5.4 No Violation or Conflict. Subject to the receipt of the approvals and consents, if any, described in Section 7.1(a) of this Agreement and except for the Amended and Restated Credit Agreement, dated as of October 2, 1997, by and among IPC, Inc., Parent, NationsBank, N.A. and Bankers Trust, as agents, and other parties thereto, the execution, delivery and performance by the Parent and Acquisition of this Agreement and all documents and instruments required by this Agreement to be executed and delivered by the Parent and/or Acquisition do not and will not conflict with or violate any Law, the Certificate of Incorporation or Articles of Incorporation, as the case may be, or By-laws of the Parent or Acquisition or any material contract or agreement to which the Parent or Acquisition is a party or by which it is bound. 5.5 Litigation. There are no actions, suits or proceedings pending or, to the knowledge of the Parent, threatened against the Parent or Acquisition or any shareholder of the Parent, by any Person which question the validity, legality or propriety of the transactions contemplated by this Agreement. 5.6 Sufficient Funds. Parent has, or will have at the time of consummation of the Offer, sufficient funds available to purchase, or to cause Acquisition to purchase, on a fully diluted basis, all the outstanding Shares pursuant to the Offer and the Merger and pay all fees and expenses related to the transactions contemplated by this Agreement. 40 47 ARTICLE 6 COVENANTS 6.1 Conduct of Business by the Company. From and after the date of this Agreement and until the termination of this Agreement or the Closing Date (whichever first occurs), the Company shall: (a) carry on its business in the usual, regular and ordinary course substantially in the same manner as heretofore carried on; (b) not (i) make payments or distributions (other than normal salaries) to any Affiliate of the Company except for transactions in the ordinary course of business upon commercially reasonable terms; (ii) sell, lease, transfer or assign any of its assets, tangible or intangible, other than for a fair consideration in the ordinary course of business and other than the disposition of obsolete or unusable property; (iii) enter into any Contract (other than purchase and sales orders in the ordinary course of business in accordance with past practice) involving either more than $50,000 or outside the ordinary course of business without the consent of the Parent (which consent shall not be unreasonably withheld); (iv) accelerate, terminate, modify in any material respect, or cancel any Contract (other than purchase and sales orders in the ordinary course of business in accordance with past practice) involving more than $50,000 to which the Company is a party or by which any of them is bound without the consent of the Parent (which consent shall not be unreasonably withheld); (v) make any capital expenditure (or series of related capital expenditures) involving either more than $50,000 (unless such expenditure is identified in the current business plan of the Company as disclosed to Parent) or outside the ordinary course of business; (vi) delay or postpone the payment of accounts payable and other liabilities outside the ordinary course of business; (vii) cancel, compromise, waive or release any right or claim (or series of related rights and claims) not covered by the reserves or accruals relating to such claim in the Company Financial Statements either involving more than $50,000 or outside the ordinary course of business without the consent of the Parent (which consent shall not be unreasonably withheld); (viii) grant any license or sublicense of any rights under or with respect to any Intangible Assets; or (ix) make any loan to, or enter into any other transaction with, any of its Affiliates, directors, officers and employees outside the ordinary course of business; 41 48 (c) use, operate, maintain and repair all of its assets and properties in a normal business manner consistent with its past practices; (d) use commercially reasonable efforts to preserve in all material respects its business organization intact, to retain the services of the Employees and to conduct business with suppliers, customers, creditors and others having business relationships with the Company in the best interests of the Company; (e) not knowingly do any act or knowingly omit to do any act or, to the extent within the Company's reasonable control, knowingly permit any act or omission to act, which will cause a breach of any of the Contracts that would have a Material Adverse Effect; (f) use reasonable efforts to maintain all of the Existing Insurance Policies (or policies substantially equivalent thereto) in full force and effect; (g) (i) except as required by any Contract or in a manner consistent with past practice, grant any increase in the rate of pay of any of the Employees; (ii) institute or amend any Employee Benefit Plan unless required by Law; (iii) enter into or modify any written employment agreement with any Person; or (iv) pay or accrue any bonus or incentive compensation to any Person; (h) other than in the ordinary course of business, not create, incur or assume any Indebtedness or make any Investment; (i) not amend the Company Charter Documents; (j) not (i) issue any additional shares of stock of any class (except pursuant to the Existing Options) or grant any warrants, options or rights to subscribe for or acquire any additional shares of stock of any class; (ii) declare or pay any dividend or make any capital, surplus or other distributions (other than normal salaries) of any nature to the Shareholders; or (iii) directly or indirectly redeem, purchase or otherwise acquire, recapitalize or reclassify any of its capital stock or liquidate in whole or in part; (k) timely and properly file, or timely and properly file requests for extensions to file, all federal, state, local and foreign tax returns which 42 49 are required to be filed, and pay or make provision for the payment of all taxes owed by it; (l) not knowingly do any act or omit to do any act that would result in a breach of any representation by the Company set forth in this Agreement; and 6.2 Shareholder Option Agreements. On or before the date hereof, the Company will use its reasonable best efforts to obtain and deliver to Parent a Shareholder Option Agreement, in the form attached as Exhibit 2 hereto, executed by each of Calvin Krupa and James Thole. ARTICLE 7 CONDITIONS 7.1 Conditions to Each Party's Obligation to Effect the Merger. The respective obligation of each party to consummate the Merger shall be subject to the satisfaction prior to or at the Closing as hereinafter provided of the following express conditions precedent, each of which may be waived in whole or in part by the Company, Parent or Acquisition, as the case may be, to the extent permitted by law: (a) Regulatory Approvals. Clearance from the appropriate agencies, pursuant to the Hart-Scott-Rodino Antitrust Improvements Act, as amended (the "HSR Act"), shall have been obtained by the Company and the Parent or the waiting period thereby required shall have expired or been terminated. (b) Approval of Shareholders. This Agreement, the Merger and the transactions contemplated by this Agreement shall (if necessary) have received the requisite approval and authorization of the Shareholders. (c) Statutes, Court Orders. No statute, rule or regulation shall have been enacted or promulgated by any governmental authority which prohibits the consummation of the Merger; and there shall be no order or injunction of a court of competent jurisdiction in effect precluding consummation of the Merger. (d) Purchase of Company Common Stock in Offer. Parent, Acquisition or their affiliates shall have purchased Company Common Stock 43 50 pursuant to the Offer, except that this condition shall not apply if Parent, Acquisition or their affiliates shall have failed to purchase Company Common Stock pursuant to the Offer in breach of their obligations under this Agreement. 7.2 Condition to Parent's and Acquisition's Obligation to Effect the Merger. The obligations of Parent and Acquisition to consummate the Merger are further subject to the fulfillment of the condition that all actions contemplated by Section 2.18(b) hereto shall have been taken, which may be waived in whole or part by Parent or Acquisition. ARTICLE 8 NO SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION 8.1 No Survival of Representations and Warranties. None of the representations, warranties, covenants, agreements and certifications of the Company and/or any officer of the Company contained herein shall survive the Effective Time. 8.2 Directors' and Officers' Indemnification. (a) Subsequent to the Effective Time, Acquisition shall cause the Surviving Corporation to, and the Surviving Corporation and Parent, jointly and severally, shall, indemnify and hold harmless each present and former director and officer of the Company (collectively, the "Indemnified Parties") against all losses in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to any action or omission in their capacity as director or officer occurring before the Effective Time, whether asserted or claimed prior to, at or after the Effective Time, for a period of six years after the Closing Date, in each case to the fullest extent permitted under applicable Law (and shall pay any expenses in advance of the final disposition of such action or proceeding to each Indemnified Party to the fullest extent permitted under applicable Law, upon receipt from the Indemnified Party to whom expenses are advanced of an undertaking to repay such advances as required under applicable Law); provided, however, that, if any claim for indemnification is asserted or made within such six year period, all rights to indemnification in respect of such claim 44 51 shall continue until the disposition of such claim. Until the Effective Time, the Company shall keep in effect Article 7 of its certificate and Article 5 of its bylaws, and thereafter for a period of six years the Surviving Corporation shall keep in effect in its certificate and bylaws provisions which provide for indemnification exculpation to the extent provided for in Article 7 and Article 5 of the certificate and bylaws, respectively. (b) In the event the Surviving Corporation or any of its respective successors or assigns (i) consolidates with or merges into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all or substantially all of its properties and assets to any Person, then, and in each such case, provision shall be made by the Surviving Corporation so that the successors and assigns of the Surviving Corporation shall assume the obligations set forth in this Section 8.2. (c) Parent and Acquisition shall cause to be maintained in effect for not less than four years after the Effective Time the current policies, or substantially similar policies, of directors' and officers' liability insurance maintained by the Company with respect to matters existing or occurring at or prior to the Effective Time; provided, however, the Parent and Acquisition shall not be required to expend an amount greater than 150% of the annual premium of the current policy. ARTICLE 9 TERMINATION 9.1 Termination. This Agreement may be terminated and the transactions contemplated by this Agreement may be abandoned at any time prior to the Closing (whether before or after the approval of this Agreement by the Shareholders), as follows: (a) by mutual written agreement of the Parent and the Company; (b) by either of the Company or Parent: (i) if (x) the Offer shall have expired without any Company Common Stock being purchased therein or (y) Acquisition shall not have accepted for payment all Company Common Stock tendered pursuant to the Offer by 45 52 September 30, 1998; provided, however, that the right to terminate this Agreement under this Section 9.1(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 Parent or Acquisition, as the case may be, to purchase the Company Common Stock 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, Company Common Stock 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: (i) if Parent, Acquisition or any of their affiliates shall have failed to commence the Offer on or prior to five business days following the date of the initial public announcement of the Offer; provided, that the Company may not terminate this Agreement pursuant to this Section 9.1(c)(i) if the Company is at such time in breach of its obligations under this Agreement; (ii) in connection with entering into a definitive agreement in connection with an Acquisition Transaction, provided it has complied with all provisions of Section 3.4, including the notice provisions therein, and that it makes simultaneous payment of the $2,500,000 payment referred to in Section 9.3 hereof, plus any amounts then due as a reimbursement of expenses; or (iii) if Parent or Acquisition 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 30 days after the giving of written notice to Parent or Acquisition, as applicable. (d) by Parent: (i) if, due to an occurrence, not involving a breach by Parent or Acquisition of their obligations hereunder, which makes it impossible to satisfy any of the conditions set forth in Annex A hereto, Parent, Acquisition, or any 46 53 of their affiliates shall have failed to commence the Offer on or prior to five business days following the date of the initial public announcement of the Offer; (ii) if prior to the purchase of Company Common Stock pursuant to the Offer, the Company shall have breached any representation, warranty, covenant or other agreement contained in this Agreement which (A) would give rise to the failure of a condition set forth in paragraph (f) or (g) of Annex A hereto and (B) cannot be or has not been cured, in all material respects, within 30 days after the giving of written notice to the Company; or (iii) if either Parent or Acquisition is entitled to terminate the Offer as a result of the occurrence of any event set forth in paragraph (e) of Annex A hereto. 9.2 Rights on Termination. In the event of termination and abandonment of the Merger by any party pursuant to Section 9.1, written notice thereof shall forthwith be given to the other parties and this Agreement shall terminate and the Merger and the other transactions contemplated hereby shall be abandoned, without further action by any of the parties hereto. If this Agreement is terminated and the transactions contemplated hereby are not consummated pursuant to Section 9.1 of this Agreement, this Agreement shall become void and of no further force and effect, except for (a) the provisions of Section 3.1 relating to the obligation of the Parent and Acquisition to keep confidential and not to use certain information obtained from the Company and (b) the provisions of Section 9.3 relating to the Company's obligations to make certain payments to the Parent. 9.3 Termination Fee Payable to the Parent. Notwithstanding any provision to the contrary contained herein, the Company shall immediately pay to the Parent (x) the amount of $2,500,000 and (y) all reasonably documented out-of-pocket expenses reasonably incurred by the Parent and Acquisition in connection with this Agreement and the Merger in an amount not to exceed $600,000 if this Agreement is terminated: (1) by the Company pursuant to Section 9.1(c)(ii), (2) by the Parent pursuant to Section 9.1(d)(iii) hereof, (3) by Parent pursuant to Section 9.1(d)(ii) if the breach thereof is due to the Company's intentional or bad faith acts, or (4) by either the Company or Parent pursuant to Section 9.1(b)(i) and (a) prior thereto there shall have been publicly announced another Acquisition Proposal or an event set forth in paragraph (h) of Annex A shall have occurred and (b) an Acquisition Proposal shall be consummated on or prior to March 31, 1999. The amount in (x) above shall be paid concurrently with any such termination and the 47 54 amount in (y) above shall be paid within five (5) business days after receipt by the Company of reasonably detailed evidence of the same. Upon receipt of such payments, the Parent shall not be entitled to and shall waive the right to seek damages or other amounts or remedies from the Company for breach of, or otherwise in connection with, this Agreement. 9.4 Other Remedies. Notwithstanding any provision to the contrary contained herein, if this Agreement is terminated pursuant to Article 9 or otherwise by the Company, on the one hand, or the Parent or Acquisition, on the other hand, and the non-terminating party is not entitled to receive the payments described in Section 9.3 (as the case may be), then the non-terminating party shall be entitled to pursue any available legal rights to recover actual damages, including, without limitation, its reasonable costs and expenses incurred in pursuing such recovery (including, without limitation, reasonable attorneys' fees). ARTICLE 10 MISCELLANEOUS 10.1 Expenses. If this Agreement is not consummated, the Parent and Acquisition, on the one hand, and the Company, on the other hand, shall bear their respective legal fees and expenses. 10.2 Entire Agreement; Amendment. This Agreement and the documents referred to in this Agreement and required to be delivered pursuant to this Agreement constitute the entire agreement among the parties pertaining to the subject matter of this Agreement, and supersede all prior and contemporaneous agreements, understandings, negotiations and discussions of the parties, whether oral or written, and there are no warranties, representations or other agreements between the parties in connection with the subject matter of this Agreement, except as specifically set forth in this Agreement. No amendment, supplement, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision of this Agreement, whether or not similar, nor shall such waiver constitute a continuing waiver unless otherwise expressly provided. 48 55 10.3 Governing Law. This Agreement shall be governed and construed (i) with respect to the Merger, in accordance with the laws of the State of Minnesota and (ii) with respect to all other transactions contemplated hereunder, in accordance with the laws of the State of Illinois, applicable to agreements made and to be performed entirely within such States. 10.4 Assignment. Prior to the Closing, this Agreement may not be assigned by any party hereto, except with the prior written consent of the other parties hereto. 10.5 Notices. All communications or notices required or permitted by this Agreement shall be in writing and shall be deemed to have been given at the earlier of the date personally delivered or sent by telephonic facsimile transmission (with a copy via regular mail) or one day after sending via nationally recognized overnight courier or five days after deposit in the United States mail, certified or registered mail, postage prepaid, return receipt requested, and addressed as follows, unless and until any of such parties notifies the others in accordance with this Section of a change of address: If to the Parent: Ivex Packaging Corporation 100 Tri-State Drive Suite 200 Lincolnshire, Illinois 60069 Telephone: (847) 945-9100 Telecopy: (847) 945-2355 Attention: General Counsel With a copy to: Skadden, Arps, Slate, Meagher & Flom (Illinois) 333 West Wacker Suite 2100 Chicago, Illinois 60606 Telephone: (312) 407-0700 Telecopy: (312) 407-0411 Attention: William R. Kunkel, Esq. 49 56 If to the Company: ULTRA PAC, Inc. 22051 Industrial Boulevard Rogers, Minnesota 55374 Telephone: (612) 428-8340 Fax No. Attention: Calvin Krupa with a copy to: Larkin Hoffman Daly & Lindren 7900 Xerxes Avenue South Suite 1500 Bloomington, MN 55431 Telephone: (612) 896-3291 Fax No.: (612) 896-3333 Attention: Frank I. Harvey, Esq. and Katten Muchin & Zavis 525 W. Monroe Suite 1600 Chicago, IL 60661 Telephone: (312) 902-5200 Fax No.: (312) 902-1061 Attention: David J. Kaufman, Esq. 10.6 Counterparts; Headings. This Agreement may be executed in several counterparts, each of which shall be deemed an original, but such counterparts shall together constitute but one and the same Agreement. The Article and Section headings in this Agreement are inserted for convenience of reference only and shall not constitute a part hereof. 10.7 Interpretation. Unless the context requires otherwise, all words used in this Agreement in the singular number shall extend to and include the plural, all words in 50 57 the plural number shall extend to and include the singular, and all words in any gender shall extend to and include all genders. 10.8 Specific Performance. The parties agree that the assets and business of the Company as a going concern constitute unique property and, accordingly, each party shall be entitled, at its option and in addition to any other remedies available as herein provided, to the remedy of specific performance to effect the Merger as provided in this Agreement. 10.9 No Reliance. Except for the parties to this Agreement: (a) no Person is entitled to rely on any of the representations, warranties and agreements of the parties contained in this Agreement; and (b) the parties assume no liability to any Person because of any reliance on the representations, warranties and agreements of the parties contained in this Agreement. 10.10 Exhibits and Schedules. The Exhibits and Schedules are a part of this Agreement as if fully set forth herein. All references herein to Sections, subsections, clauses, Exhibits and Schedules shall be deemed references to such parts of this Agreement, unless the context shall otherwise require. 10.11 No Third Party Beneficiary. Except as provided pursuant to Section 8.2 hereof, the terms and provisions of this Agreement are intended solely for the benefit of the parties hereto and their respective successors and assigns and it is not the intention of the parties to confer third-party beneficiary rights upon any other Person. 51 58 IN WITNESS WHEREOF, the parties have caused this Agreement and Plan of Merger to be duly executed as of the day and year first above written. IVEX PACKAGING CORPORATION By: /s/ GEORGE V. BAYLY ------------------------------------ Name George V. Bayly Title: Chairman of the Board, Chief Executive Officer and President PACKAGE ACQUISITION, INC. By: /s/ FRANK V. TANNURA ------------------------------------ Name Frank V. Tannura Title: President ULTRA PAC, INC. By: /s/ CALVIN S. KRUPA ------------------------------------ Name Calvin S. Krupa Title: Chairman, Chief Executive Officer and President 59 ANNEX A CERTAIN CONDITIONS OF THE OFFER Notwithstanding any other provisions of the Offer, and in addition to (and not in limitation of) Acquisition's right to extend and amend the Offer at any time in its sole discretion (subject to the provisions of the Merger Agreement), Acquisition 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 Acquisition's obligation to pay for or return tendered Company Common Stock promptly after termination or withdrawal of the Offer), and may terminate or amend the Offer as to any Company Common Stock not then paid for, if (i) any applicable waiting period under the HSR Act has not expired or terminated, (ii) the Minimum Condition has not been satisfied, or (iii) at any time on or after the date of the Merger Agreement and before the time of acceptance for payment for any such Company Common Stock, any of the following events shall have occurred: (a) there shall be threatened or pending any suit, action or proceeding by an Governmental Entity against Acquisition, Parent or the Company (i) seeking to prohibit or impose any material limitations on Parent's or Acquisition's ownership or operation (or that of Parent's Subsidiaries or affiliates) of all or a material portion of their or the Company's businesses or assets, or to compel Parent or Acquisition or Parent's Subsidiaries and affiliates to dispose of or hold separate any material portion of the business or assets of the Company or Parent and Parent's Subsidiaries, in each case taken as a whole, (ii) challenging the acquisition by Parent or Acquisition of any Company Common Stock under the Offer, seeking to restrain or prohibit the making or consummation of the Offer or the Merger or the performance of any of the other transactions contemplated by the Agreement, or seeking to obtain from the Company, Parent or Acquisition any damages that are material in relation to the Company, (iii) seeking to impose material limitations on the ability of Acquisition, or render Acquisition unable, to accept for payment, pay for or purchase some or all of the Company Common Stock pursuant to the Offer and the Merger, (iv) seeking to impose material limitations on the ability of Acquisition or Parent effectively to exercise full rights of ownership of the Company Common Stock, including, without limitation, the right to vote the Company Common Stock purchased by it on all matters properly presented to the Company's shareholders, or (v) which otherwise is reasonably likely to have a Material Adverse Effect; 60 (b) there shall be any statute, rule regulation, judgment, order or injunction enacted, entered, enforced or promulgated on behalf of a Government Entity, to the Offer or the Merger, or any other action shall be taken by any Governmental Entity, other than the application to the offer or the Merger of applicable waiting periods under HSR Act, 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; (c) there shall have occurred (i) any general suspension of trading in, or limitation on prices for, securities on the New York Stock Exchange for a period in excess of 24 hours (excluding 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 governmental authority on the extension of credit generally by banks or other financial institutions, or (v) a change in general financial, bank or capital market conditions which materially and 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; (d) there shall have occurred any events after the date of the Agreement which, either individually or in the aggregate, would have a Material Adverse Effect; provided, however, that no event, change or effect that materially results from the Transactions or the announcement thereof shall be deemed to cause either individually or in the aggregate, a Material Adverse Effect; (e) (i) the Board of Directors of the Company shall have withdrawn or modified in a manner adverse to Parent or Acquisition its approval or recommendation of the Offer, the Merger or the Agreement, or approved or recommended any Acquisition Proposal or (ii) the Company shall have entered into any agreement with respect to any Superior Proposal in accordance with Section 3.4 of the Agreement; (f) the representations and warranties of the Company set forth in the Agreement shall not be true and correct, in each case (i) as of the date referred to in any representation or warranty which addresses matters as of a particular date, or (ii) as to all other representations and warranties, as of the date of the Agreement and as of the scheduled expiration of the Offer, unless the inaccuracies (without giving effect to any 61 materiality or material adverse effect qualifications or materiality exceptions contained therein) under such representations and warranties, taking all the inaccuracies under all such representations and warranties together in their entirety, do not, individually or in the aggregate, result in a Material Adverse Effect; (g) the Company shall have failed to perform any obligation or to comply with any agreement or covenant to be performed or complied with by it under the Agreement other than any failure which would not have, either individually or in the aggregate, a Material Adverse Effect; (h) any person acquires beneficial ownership (as defined in Rule 13d-3 promulgated under the Exchange Act) of at least 15% of the outstanding Company Common Stock (other than any person not required to file a Schedule 13D under the rules promulgated under the Exchange Act); or (i) the Agreement shall have been terminated in accordance with its terms. The foregoing conditions are for the sole benefit of Parent and Acquisition, may be asserted by Parent or Acquisition regardless of the circumstances giving rise to such condition (including any action or inaction by Parent or Acquisition not in violation of the Agreement) and may be waived by Parent or Acquisition in whole or in part at any time and from time to time in the sole discretion of Parent or Acquisition, subject in each case to the terms of the Merger Agreement. The failure by Parent or Acquisition 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 from time to time. EX-99.C.2 11 FORM OF TENDER AND OPTION AGREEMENT 1 EXHIBIT (c)(2) TENDER AND OPTION AGREEMENT TENDER AND OPTION AGREEMENT, dated as of March , 1998 (the "Agreement"), by and among Ivex Packaging Corporation, a Delaware corporation ("Parent"), Package Acquisition, Inc., a Minnesota corporation and an indirect wholly-owned subsidiary of Parent ("Acquisition"), and (the "Shareholder"). WHEREAS, the Shareholder is the owner of _________ shares (the "Shares") of Common Stock, no par value per share (the "Common Stock"), of Ultra Pac, Inc. (the "Company"); WHEREAS, the Parent, Acquisition and the Company have entered into an Agreement and Plan of Merger, dated as of the date hereof (as amended from time to time, the "Merger Agreement"), which provides, among other things, that, upon the terms and subject to the conditions therein, Acquisition will make a cash tender offer (the "Offer") for all of the outstanding shares of Common Stock and after expiration of the Offer will merge with and into the Company (the "Merger"); and WHEREAS, as a condition to the willingness of Parent and Acquisition to enter into the Merger Agreement, Parent has requested that the Shareholder agree, and in order to induce Parent and Acquisition to enter into the Merger Agreement, the Shareholder has agreed, to enter into this Agreement. NOW, THEREFORE, in consideration of the foregoing premises and the representations, warranties, covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and subject to the terms and conditions set forth herein, the parties hereto hereby agree as follows: 1. Representations and Warranties of the Shareholder. The Shareholder represents and warrants to the Parent as follows: a. The Shareholder is the sole record and beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of the Shares and, except for the pledge of shares of common stock (the "Pledged Shares") to Norwest Bank, N.A., there exist 2 no liens, claims, security interests, options, proxies, voting agreements, charges, obligations, understandings, arrangements or other encumbrances of any nature hatsoever, except for restrictions applicable thereto under federal and state securities laws ("Liens"), affecting the Shares. b. The Shares and the certificates representing the Shares are now and at all times during the term hereof will be held by the Shareholder, or by a nominee or custodian for the benefit of the Shareholder free and clear of all Liens, except for the Liens described in (a) above and Liens arising hereunder. Upon transfer to Parent by the Shareholder of the Shares hereunder, Parent will have good and marketable title to the Shares, free and clear of all Liens. c. This Agreement has been duly and validly executed and delivered by the Shareholder and, assuming due authorization, execution and delivery by Parent and Acquisition, constitutes a valid and binding agreement of the Shareholder, enforceable against the Shareholder in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy or other laws affecting the enforcement of creditors' rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. d. The execution and delivery of this Agreement by the Shareholder does not, and the performance by the Shareholder of its obligations hereunder will not, constitute a violation of, conflict with, result in a default (or an event which, with notice or lapse of time or both, would result in a default) under, or result in the creation of any Lien on any Shares under, (i) any contract, commitment, agreement, partnership agreement, understanding, arrangement or restriction of any kind to which the Shareholder is a party or by which the Shareholder is bound, (ii) any judgment, writ, decree, order or ruling applicable to the Shareholder or (iii) any law applicable to the Shareholder. e. To the Shareholder's knowledge, neither the execution and delivery of this Agreement nor the performance by the Shareholder of its obligations hereunder will require any consent, authorization or approval of, filing with or notice to, any court, administrative agency or other governmental body or authority, other than any required notices or filings pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder (the "HSR Act"), state antitrust laws or the federal securities laws. 2 3 2. Representations and Warranties of Parent and Acquisition. Parent and Acquisition jointly and severally represent and warrant to the Shareholder as follows: a. Each of Parent and Acquisition is duly organized and validly existing and in good standing under the laws of its jurisdiction of incorporation, has the requisite corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, and has taken all necessary corporate action to authorize the execution, delivery and performance of this Agreement. This Agreement has been duly and validly executed and delivered by each of Parent and Acquisition and constitutes the legal, valid and binding obligation of each of Parent and Acquisition, enforceable against each of Parent and Acquisition in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or other laws affecting the enforcement of creditors' rights generally and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. b. The execution and delivery of this Agreement by each of Parent and Acquisition does not, and the performance by each of Parent and Acquisition of its obligations hereunder will not, constitute a violation of, conflict with, or result in a default (or an event which, with notice or lapse of time or both, would result in a default) under, its charter or bylaws or any contract, commitment, agreement, understanding, arrangement or restriction of any kind to which Parent or Acquisition is a party or by which Parent or Acquisition is bound or any judgment, writ, decree, order or ruling applicable to Parent or Acquisition. c. Neither the execution and delivery of this Agreement nor the performance by each of Parent and Acquisition of its obligations hereunder will violate any order, writ, injunction, judgment, law, decree, statute, rule or regulation applicable to Parent or Acquisition or require any consent, authorization or approval of, filing with, or notice to, any court, administrative agency or other governmental body or authority, other than any required notices or filings pursuant to the HSR Act, state antitrust laws or the federal securities laws. 3. Tender of Shares. 3 4 a. Parent and Acquisition jointly and severally agree: i. subject to the conditions of the Offer set forth in Annex A to the Merger Agreement and the other terms and conditions of the Merger Agreement, that Acquisition will purchase all shares of Common Stock tendered pursuant to the Offer as promptly as practicable following commencement of the Offer and that Acquisition will consummate the Merger in accordance with the terms of the Merger Agreement; ii. not to decrease the price per share to be paid to the Company's shareholders in the Offer below $15.50 per share (the "Tender Offer Price"); and iii. to deliver, or to cause to be delivered, the Offer Documents to the Shareholder. The provisions of Sections 3(a)(i) and 3(a)(ii) shall survive the termination of this Agreement. b. The Shareholder will (i) tender the Shares (other than the Pledged Shares which will be tendered as soon as practicable) into the Offer promptly, and in any event no later than the fifth business day following the com mencement of the Offer, or, if the Shareholder has not received the Offer Documents by such time, within two business days following receipt of such documents, and (ii) not withdraw any Shares so tendered (except in the event the Stock Option is exercised). Upon the purchase of all the Shares pursuant to the Offer in accordance with this Section 3, this Agreement will terminate. The Shareholder will receive the same price per Share received by other shareholders of the Company in the Offer with respect to Shares tendered by it in the Offer. In the event that, notwithstanding the provisions of the first sentence of this Section 3(b), any Shares are for any reason withdrawn from the Offer or are not purchased pursuant to the Offer, such Shares will remain subject to the terms of this Agreement. The Shareholder acknowledges that Acquisition'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. On the date the Shares are accepted for payment and purchased by Acquisition pursuant to the Offer, Acquisition or Parent, as the case may be, shall make payment by wire transfer to the Shareholder of the purchase price for such Shares to an account designated by the Shareholder. c. The Shareholder hereby agrees to permit Parent to publish and disclose in the Offer Documents and, if approval of the shareholders of the Company is required under applicable law, the Proxy Statement, its identity and 4 5 ownership of Common Stock and the nature of its commitments, arrangements and understandings under this Agreement. 4. Option to Purchase. a. The Shareholder hereby grants to Parent, subject to the terms and conditions hereof, an irrevocable option (the "Stock Option") to purchase the Shares at a purchase price per share of $15.50 per Share (the "Exercise Price") in cash, in the manner set forth in this Section 4. At any time prior to the termination of the Stock Option hereunder, Parent (or a wholly owned subsidiary of Parent) may exercise the Stock Option, in whole only, if on or after the date hereof: i. any corporation, partnership, individual, trust, unincorporated association, or other entity or "person" (as defined in Section 13(d)(3) of the Exchange Act) other than Parent or any of its "affiliates" (as defined in the Exchange Act) (a "Third Party"), will have: A. commenced or announced an intention to commence a bona fide tender offer or exchange offer for any shares of Common Stock, the consummation of which would result in "beneficial ownership" (as defined in the Exchange Act) by such Third Party (together with all such Third Party's affiliates and "associates" (as defined in the Exchange Act)) of 50% or more of the then outstanding voting equity of the Company (either on a primary or a fully diluted basis); B. acquired beneficial ownership of shares of Common Stock that, when aggregated with any shares of Common Stock already owned by such Third Party, its affiliates and associates, would result in the aggregate beneficial ownership by such Third Party, its affiliates and associates of 15% or more of the then outstanding voting equity of the Company (either on a primary or a fully diluted basis); provided, however, that "Third Party" for purposes of this clause (B) does not include any corporation, partnership, person, other entity or group that beneficially owns more than 15% of the outstanding voting equity of the Company (either on a primary or a fully diluted basis) as of the date hereof and that does not, after the date hereof, increase such ownership percentage by more than an additional 1% of the outstanding voting equity of the Company (either on a primary or a fully diluted basis); 5 6 C. acquired assets constituting 15% or more of the total assets or earning power of the Company taken as a whole; D. entered into an agreement with the Company that contemplates the acquisition of (x) assets constituting 15% or more of the total assets or earning power of the Company taken as a whole or (y) beneficial ownership of 15% or more of the outstanding voting equity of the Company; or ii. any of the events described in Section 9.1(c)(ii) or 9.1(d)(iii) of the Merger Agreement that would allow the Company or Parent to terminate the Merger Agreement has occurred (after the passage of any time periods set forth in such sections but without the necessity of the Company or Parent having terminated the Merger Agreement). In the event that Parent wishes to exercise the Stock Option, Parent shall give written notice (the "Option Notice", with the date of the Option Notice being hereinafter called the "Notice Date") to the Shareholder specifying the place and date (not earlier than three nor later than ten Business Days from the Notice Date) for closing such purchase (a "Closing"). Parent's obligation to purchase the Shares upon any exercise of the Stock Option and the Shareholder's obligation to sell the Shares upon any exercise of the Stock Option are subject (at the election of Parent and the Shareholder, respectively,) to the conditions that (i) no preliminary or permanent injunction or other order prohibiting the purchase, issuance or delivery of the Shares issued by any Governmental Authority will be in effect and (ii) any applicable waiting period required for the purchase of Shares under the HSR Act will have expired or been terminated or clearance from the appropriate agencies shares have been obtained, provided that if such injunction or other order has become final and nonappealable, the Stock Option shall terminate; and provided further, that if the Stock Option is not exercisable because either of the circumstances described in clauses (i) or (ii) exist, then the Stock Option shall be exercisable for the ten business day period commencing on the date that the circumstances set forth in clauses (i) or (ii) cease to exist, but in no event shall the Stock Option be exercisable after the date set forth in Section 9(c). Parent's obligation to purchase the Shares upon exercise of the Stock Option is further subject (at Parent's election) to the condition that there will have been no material breach of the representations, warranties, covenants or agreements of the Shareholder contained in this Agreement or of the Company contained in the Merger Agreement which breach has not been cured within ten business days of the receipt of written notice thereof from the Parent. The Share holder's obligation to sell the Shares upon exercise of the Stock Option and the 6 7 Shareholder's obligations under Section 7 are subject (at the Shareholder's election) to the further conditions that there will have been no material breach of the representations, warranties, covenants or agreements of Parent or Acquisition contained in this Agreement or contained in the Merger Agreement, which breach has not been cured within ten business days of the receipt of written notice thereof from the Shareholder. Parent agrees to use its best efforts to cause any such waiting period or injunction or order to be terminated or lifted and to obtain all necessary regulatory approvals under the HSR Act. b. At the Closing, (i) the Shareholder shall deliver to Parent the certificate or certificates representing the Shares in proper form for transfer upon exercise of the Stock Option in the denominations designated by Parent in the Option Notice and (ii) Parent shall pay the aggregate purchase price for the Shares by wire transfer of immediately available funds to an account designated by the Shareholder in writing to Parent in the amount equal to the product of the Exercise Price and the number of the Shares. c. In the event that Parent or Acquisition pays a price higher than $15.50 per share for Shares tendered into the Offer, the Exercise Price shall be increased to equal such higher price. d. The Shareholder has granted the Stock Option to Parent in order to induce Parent to enter into and consummate the transactions contemplated by the Merger Agreement. Parent and Acquisition covenant and agree that they will perform their respective obligations under the Merger Agreement. The provisions of this Section 4(d) are intended both for the benefit of the Shareholder and for the benefit of the Company and the other shareholders of the Company and may not be modified, waived or amended without the consent of the Company. 5. Transfer of the Shares. a. During the term of this Agreement, the Shareholder will not offer to sell, sell, pledge or otherwise dispose of or transfer any interest in or encumber with any Lien any of the Shares, (ii) enter into any contract, option or other agreement or understanding with respect to any transfer of 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 7 8 Shares; or (v) take any other action with respect to the Shares that would in any way restrict, limit or interfere with the performance of its obligations hereunder. b. The Shareholder agrees to place the following legend on any and all certificates evidencing the Shares: THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER PURSUANT TO THAT CERTAIN TENDER AND OPTION AGREEMENT, DATED AS OF MARCH 23, 1998, BY AND BETWEEN IVEX PACKAGING CORPORATION, PACKAGE ACQUISITION INC., AND . ANY TRANSFER OF SUCH SHARES OF COMMON STOCK IN VIOLATION OF THE TERMS OF SUCH AGREEMENT SHALL BE NULL AND VOID AND OF NO EFFECT WHATSOEVER. 6. Certain Other Agreements. The Shareholder shall notify Parent immediately if any proposals are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued with the Shareholder or his attorneys, accountants or other agents (each of such actions, an "Interest"), in each case in connection with any Acquisition Transaction indicating, in connection with such notice, the name of the person indicating such Interest and the terms and conditions of any related proposals or offers. The Shareholder agrees to cease immediately and cause to be terminated immediately any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Transaction. In addition, the Shareholder agrees to keep Parent informed, on a current basis, of the status and terms of any Acquisition Transaction. The Shareholder furthermore agrees not to, and will use his best efforts to ensure that his attorneys, accountants and other agents do not, directly or indirectly: (i) initiate, solicit or encourage, or take any action to facilitate the making of, any offer or proposal that constitutes or is reasonably likely to lead to any Acquisition Transaction, (ii) enter into any agreement with respect to any Acquisition Transaction or (iii) in the event of an unsolicited written proposal in respect of a Acquisition Transaction, engage in negotiations or discussions with, or provide any information or data to, any person (other than Parent, any of its affiliates or representatives and except for information that has been previously publicly disseminated by the Company) relating to any Acquisition Transaction. The obligations provided for in this Section 8 9 6 shall become effective immediately following the execution and delivery of this Agreement by the parties hereto. 7. Voting of Shares; Grant of Irrevocable Proxy; Appointment of Proxy. a. The Shareholder hereby agrees that, during the term of this Agreement, at any meeting (whether annual or special and whether or not an adjourned or postponed meeting) of the holders of Common Stock, however called, or in connection with any written consent of the holders of Common Stock, the Shareholder will appear at the meeting or otherwise cause the Shares to be counted as present thereat for purposes of establishing a quorum and vote or consent (or cause to be voted or consented) the Shares (i) in favor of the Merger and (ii) against any action or agreement that 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 and (iii) if requested by Parent, in favor of a shareholder resolution proposed by Parent in accordance with applicable provisions of the Minnesota Business Corporation Act (the "MBCA") the purpose of which is to cause the Offer and the Merger to be consummated and which does not relate to the election of directors. b. The Shareholder hereby irrevocably grants to, and appoints, Parent and any nominee thereof, its proxy and attorney- in-fact (with full power of substitution) during the term of this Agreement, for and in the name, place and stead of the Shareholder, to vote the Shares, or grant a consent or approval in respect of the Shares, in connection with any meeting of the shareholders of the Company (i) in favor of the Merger and (ii) against any action or agreement that 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. c. The Shareholder represents that all proxies heretofore given in respect of the Shares, if any, are not irrevocable, and hereby revokes all such proxies given with respect to the Shares. d. The Shareholder hereby affirms that the irrevocable proxy set forth in this Section 7 is given in connection with the execution of the 9 10 Merger Agreement and that such irrevocable proxy is given to secure the performance of the duties of the Shareholder under this Agreement. The Shareholder hereby further affirms that the irrevocable proxy set forth in this Section 7 is coupled with an interest and is intended to be irrevocable in accordance with the provisions of Section 302A.449(2) of the MBCA. 8. Adjustments. The number and types of securities subject to this Agreement will be appropriately adjusted in the event of any stock dividends, stock splits, recapitalization, combinations, exchanges of shares or the like or any other action that would have the effect of changing the Shareholder's ownership of the Company's capital stock. 9. Termination. Except as otherwise specifically provided herein, all obligations under this Agreement will terminate on the earliest of (a) the date the Merger Agreement is terminated in accordance with its terms or the date the Offer is terminated by Parent or Acquisition as a result of any failure of a condition of the Offer; provided, however, that the provisions of Sections 4(a) shall not terminate until sixty (60) days thereafter (or such later time as permitted by Section 4(a)) if the Merger Agreement was terminated pursuant to Section 9.1(c)(ii) or 9.1(d)(iii) thereof, (b) the purchase of all the Shares pursuant to the Offer in accordance with Section 3 or pursuant to the Stock Option, or (c) on September 30, 1998. The provisions of Section 13 shall survive any termination of this Agreement. 10. Effectiveness. This Agreement shall not be effective unless and until the Merger Agreement shall have been approved by the Company's Board of Directors. 11. Brokerage. Parent, Acquisition and the Shareholder represent and warrant to the other that the negotiations relevant to this Agreement have been carried on by Parent and Acquisition, on the one hand, and the Shareholder, on the other hand, directly with the other, and that except for Wasserstein Perella & Co., Inc. ("Wasserstein"), there are no claims for finder's fees or brokerage commissions or other like payments in connection with this Agreement or the transactions contemplated hereby. Except for the fees of Wasserstein, which will be paid solely by the Company, Parent and Acquisition, on the one hand, and Shareholder, on the other hand, will indemnify and hold harmless the other from and against any and all claims or liabilities for finder's fees or brokerage commissions or other like payments incurred by reason of action taken by him, it or any of them, as the case may be. 10 11 12. Miscellaneous. a. Except for the representations and warranties set forth in Section l(b), all representations and warranties contained herein will terminate upon the termination of this Agreement. b. Any provisions of this Agreement may be waived at any time by the party that is entitled to the benefits thereof. No such waiver, amendment or supplement will be effective unless in writing and is signed by the party or parties sought to be bound thereby. Any waiver by any party of a breach of any provision of this Agreement will not operate as or be construed to be a waiver of any other breach of such provisions or of any breach of any other provision of this Agreement. The failure of a party to insist upon strict adherence to any term of this Agreement or one or more sections hereof will not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. c. This Agreement contains the entire agreement among the parties in respect to the subject matter hereof, and supersedes all prior agreements among the parties with respect to such matters. This Agreement may not be amended, changed, supplemented, waived or otherwise modified, except upon the delivery of a written agreement executed by the parties hereto. d. This Agreement will be governed by and construed in accordance with the laws of the State of Minnesota applicable to contracts made and performed in that state. Each of the parties hereto acknowledges and agrees that in the event of any breach of this Agreement, each non-breaching party would be irreparably and immediately harmed and could not be made whole by monetary damages. It is accordingly agreed that the parties hereto (i) will waive, in any action for specific performance, the defense of adequacy of a remedy at law and (ii) will be entitled, in addition to any other remedy to which they may be entitled at law or in equity, to compel specific performance of this Agreement in any action instituted in any state or federal court sitting in Minneapolis, Minnesota. Capitalized terms used and not otherwise defined herein shall have the meanings set forth in the Merger Agreement. e. The descriptive headings contained herein are for convenience and reference only and will not affect in any way the meaning or interpretation of this Agreement. 11 12 f. All communications or notices required or permitted by this Agreement shall be in writing and shall be deemed to have been given at the earlier of the date personally delivered or sent by telephonic facsimile transmission (with a copy via regular mail) or one day after sending via nationally recognized overnight courier or five days after deposit in the United States mail, certified or registered mail, postage prepaid, return receipt requested, and addressed as follows, unless and until any of such parties notifies the others in accordance with this Section of a change of address: If to Shareholder to: [ ] c/o ULTRA PAC, Inc. 22051 Industrial Boulevard Rogers, Minnesota 55374 Telephone: (612) 428-8340 Fax No. (612) 428-2754 with a copy to: Larkin Hoffman Daly & Lindren 7900 Xerxes Avenue South Suite 1500 Bloomington, MN 55431 Telephone: (612) 896-3291 Fax No.: (612) 896-3333 Attention: Frank I. Harvey, Esq. and Katten Muchin & Zavis 525 W. Monroe Suite 1600 Chicago, IL 60661 Telephone: (312) 902-5200 Fax No.: (312) 902-1061 Attention: David J. Kaufman, Esq. If to Parent or Acquisition to: 12 13 Ivex Packaging Corporation 100 Tri-State Drive Suite 200 Lincolnshire, IL 60069 Telephone: (847) 945-9100 Telecopy: (847) 945-2355 Attention: G. Douglas Patterson, Esq. With a copy to: Skadden, Arps, Slate, Meagher & Flom (Illinois) 333 West Wacker Suite 2100 Chicago, IL 60606 Telephone: (312) 407-0700 Telecopy: (312) 407-0411 Attention: William R. Kunkel, Esq. or to such other address as any party may have furnished to the other parties in writing in accordance herewith. g. This Agreement may be executed in any number of counterparts, each of which will be deemed to be an original, but all of which together will constitute one agreement. h. This Agreement is binding upon and is solely for the benefit of the parties hereto and their respective successors, legal representatives and assigns. Neither this Agreement nor any of the rights, interests or obligations under this Agreement may be assigned by any of the parties hereto without the prior written consent of the other parties. i. If any term or other provision of this Agreement is determined to be invalid, illegal or incapable of being enforced by any rule of law or public policy, all other terms and provisions of this Agreement will nevertheless remain in full force and effect as long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party hereto. Upon any such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto will negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as 13 14 possible in an acceptable manner to the end that the transactions contemplated by this Agreement are consummated to the extent possible. j. All rights, powers and remedies provided under this Agreement or otherwise available in respect hereof at law or in equity will be cumulative and not alternative, and the exercise of any thereof by either party will not preclude the simultaneous or later exercise of any other such right, power or remedy by such party. 13. Expenses. Except as provided in Section 4 hereof, all fees and expenses incurred by any one party hereto shall be borne by the party incurring such fees and expenses. 14. Further Assurances; Shareholder Capacity. a. The Shareholder shall, upon request of Parent or Acquisition, execute and deliver any additional documents and take such further actions as may reasonably be deemed by Parent or Acquisition to be necessary or desirable to carry out the provisions hereof and to vest the power to vote the Shares as contemplated by Section 7 hereof in Parent. b. Nothing in this Agreement shall be construed to prohibit any affiliate of the Shareholder who is a member of the Board of Directors of the Company from taking any action solely in his capacity as a member of the Board of Directors of the Company to the extent specifically permitted by the Merger Agreement or as required by applicable law. 14 15 IN WITNESS WHEREOF, the Parent, Acquisition and the Share- holder have caused this Agreement to be signed by their respective officers or representatives thereunto duly authorized, all as of the date first written above. IVEX PACKAGING CORPORATION By: ______________________________ Name: Title: PACKAGE ACQUISITION, INC. By: ______________________________ Name: Title: __________________________________ , as Shareholder 15 EX-99.C.3 12 CONFIDENTIALITY AGREEMENT 1 EXHIBIT (C)(3) ULTRA PAC, INC. 21925 Industrial Boulevard Rogers, Minnesota 55374 February 27, 1998 Ivex Packaging Corporation 100 Tri-State Drive Suite 200 Lincolnshire, Il 60069 Attention: Frank V. Tannura Vice President and Chief Financial Officer Gentlemen: In connection with your consideration of negotiations and/or a possible transaction (a "Transaction") by you or one or more of your affiliates (as the term "affiliate" is defined in the Securities Exchange Act of 1934, as amended (the "Exchange Act")), involving Ultra Pac, Inc. (the "Company"), the Company and its advisors are prepared to make available to you certain information which is confidential or proprietary in nature. Except as required by law or regulation, you agree to treat confidentially all such information whether written or oral (the "Evaluation Material") and to observe the terms and conditions set forth herein. You agree that prior to giving any of your agents or representatives (collectively, the "Representatives") access to any of the Evaluation Material, you shall provide each such Representative a copy of this letter (this "Agreement"). You further agree to be responsible for any breach of this Agreement by any of your Representatives. Except as required by law or regulation, you agree not to disclose or allow disclosure to others of any Evaluation Material; provided that you may disclose Evaluation Material to your Representatives to the extent necessary to permit such Representatives to assist you in making the determination referred to below. You agree that you will not use the Evaluation Material for any purpose other than determining whether you wish to enter into a Transaction and will not use the Evaluation Material in any way directly or indirectly detrimental to the Company. For eighteen months from the date hereof, you agree to not solicit the employment of or hire any executive officers or sales directors of the Company. For the purposes of this Agreement, Evaluation Material shall include, without limitation, all confidential or proprietary information (whether prepared by the Company or otherwise and in whatever form maintained), regardless of the form of communication, that contain or otherwise reflect information concerning the Company that you or your Representatives may be provided by or on behalf of the Company in the course of your evaluation of a possible Transaction, including all information, whether prepared by you, your Representatives or others, that contain or otherwise reflect or are based upon any such Evaluation Material (collectively, the "Notes"). This Agreement shall be inoperative as to those particular portions of the Evaluation Material that (i) become generally available to the public other than as result of a disclosure by you or any of your Representatives, (ii) were available to you on a non-confidential basis prior to the disclosure of such Evaluation Material to you pursuant to this Agreement, provided that the source of such information was not known by you to be bound by a confidentiality agreement, with or other contractual, legal or fiduciary obligation of confidentiality to the Company or any of its affiliates or (iii) become available to you on a non-confidential basis from a source other than the Company or its agents, advisors or representatives provided that the source of such information was not known by you to be bound by a confidentiality agreement with or other contractual, legal or fiduciary obligation of confidentiality to the Company or any of its affiliates. 2 We remind you that the securities laws of the United States prohibit any person who has material, non-public information concerning the Company or a possible transaction involving the Company from purchasing or selling securities in reliance upon such information. Although the Company has endeavored to include the Evaluation Material information known to them which they believe to be relevant for the purpose of your investigation, you understand and agree that neither the Company nor any of its affiliates, agents, advisors or representatives (i) has made or makes any representatives or warranty, expressed or implied, as to the accuracy or completeness of the Evaluation Material or (ii) shall have any liability whatsoever to you or your Representatives relating to or resulting from the use of the Evaluation Material or any errors therein or omissions therefrom. You agree that unless and until a definitive agreement between the Company and you with respect to any Transaction has been executed, neither the Company nor you will be under any legal obligation of any kind whatsoever with respect to such Transaction, except for the obligations set forth in this Agreement. If you decide that you do not wish to proceed with a Transaction, you will promptly notify the Company of that decision. In that case or if the Company shall elect at any time to terminate further access by you to the Evaluation Material for any reason, you will promptly destroy or deliver to us all copies of the Evaluation Material in the possession of you or your affiliates or your Representatives, will destroy all Notes and will certify to the Company that the requirements of this sentence have been satisfied in full. Notwithstanding the return or destruction of Evaluation Material and Notes, you and your Representatives will continue to be bound by your obligations of confidentiality and other obligations hereunder. In the event that you or anyone to whom you transmit any Evaluation Material in accordance with this Agreement are requested or required by law to disclose any Evaluation Material, you will give the Company prompt written notice of such request or requirement so that the Company may seek an appropriate protective order or other remedy and/or waive compliance with the provisions of this Agreement. You (or such other persons to whom such request is directed) will furnish only that portion of the Evaluation Material which, in the opinion of your outside counsel, is legally required to be disclosed. It is further agreed that, if in the absence of a protective order you (or such other persons to whom such request is directed) are nonetheless legally compelled to disclose such information, you may make such disclosure without liability hereunder, provided that you give the Company notice of the information to be disclosed as far in advance of its disclosure as is practicable and, provided, further, that such disclosure was not caused by and did not result from a previous disclosure by you or any or your Representative not permitted hereunder. You agree that money damages would not be a sufficient remedy for any breach of this Agreement by you or your Representatives, that in addition to all other remedies the Company shall be entitled to specific performance and injunctive or other equitable relief as a remedy for any such breach, and you further agree to waive, any requirement for the securing or posting of any bond in connection with such remedy. You hereby irrevocably and unconditionally submit to the exclusive jurisdiction of any State or Federal court sitting in Minneapolis, Minnesota over any suit, action or proceeding arising out of or relating to this letter. You hereby agree that service of any process, summons, notice or document by U.S. registered mail addressed to you shall be effective service of process, for any action, suit or proceeding brought against you in any such court. You hereby irrevocably and unconditionally waive any objection to the laying of venue of any such suit action or proceeding brought in any such court and any claim that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. You agree that a final judgment in any such suit, action or proceeding brought in any such court shall be conclusive and binding upon you and may be enforced in any other courts to whose jurisdiction you are or may be subject, by suit upon such judgment. All modifications of waivers of and amendments to this Agreement or any part hereof must be in writing signed on behalf of you and the Company. It is further understood and agreed that no failure or delay by the Company 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 of any right, power or privilege hereunder. In the event that any provision or portion of this letter is determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this letter shall be unaffected thereby and shall 3 remain in full force and effect to the fullest extent permitted by applicable law. This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Minnesota. This Agreement shall terminate on March 1, 2001, unless any claims hereunder are asserted in writing before March 1, 2001, in which case this Agreement shall survive until final resolution of such claims. If you are in agreement with the foregoing, please so indicate by signing, dating and returning one copy of this Agreement, which will constitute our agreement with respect to the matters set forth herein. Very truly yours, ULTRA PAC, INC. By: /s/ Calvin S. Krupa --------------------------- a duly authorized signatory Agreed and Accepted: IVEX PACKAGING CORPORATION By: /s/ Frank V. Tannura ------------------------------- a duly authorized signatory Dated: February 27, 1998 -------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----