July 25, 1999

Mr. Clifford J. Grum

Chief Executive Officer

Temple-Inland, Inc.

303 South Temple Drive

Diboll, Texas 75941

Dear Cliff:

Thank you for your reply of June 14 to my earlier letter.  Your letter, however, leaves us a good deal more concerned about your leadership of our company.

We are dismayed that you take as personal encouragement that nearly one out of every three shares affirmatively voted no confidence in your current direction of Temple-Inland even after an extended surge in Temple-Inland stock price, an increase which immediately after the meeting has ground to a halt.  Indeed, the price of Temple-Inland stock has decreased 11.3% from the close of trading on May 6 through the close on July 23, compared to a decline of 2.0% for the S&P Paper and Forest Products Index.

We are also dismayed that, despite our communication with you in the past, you would continue to disregard the potential of our restructuring proposals for the company.    We have laid out three possible scenarios for consideration.  As Rick Bennett stated at the annual meeting, the weakest of these proposals would increase value by a minimum of $10 per share over that day’s trading value of about $76 per share.  Our third scenario should yield a value of $103-122 per share, a 53-82% over today’s trading price of about $67.25 per share.  We believe that this is the return against which other options ought to be measured.  At this point, with this record of performance, the burden of proof is on the Board to demonstrate that your strategy for achieving shareholder value is superior to the proposals we have asked you to consider.

Most important, we have to disagree with the lack of urgency your latest letter reveals, particularly as it relates to our suggestions for quick action on seating new directors.  As Temple-Inland grapples with an extensive array of options for maximizing shareholder value, it is clear that the addition of two to four outstanding new independent outsiders would provide constructive energy on the Board.  We believe that the best way for you to earn credibility for your strategy is to have it refined and approved by a genuinely independent board with an established record of creating shareholder value and a willingness to make a significant capital contribution to align their interests with those of the shareholders.  Using a search firm instead of the personal contacts of the current directors would show the shareholders that you are committed to finding the best possible directors. 

Your recent letter makes me think that communications between shareholders and the Board demand substantial improvement.  That is why we requested a meeting with the Board.  We wished to discuss your progress in evaluating the options for improving shareholder value and in determining the process and criteria for selecting new directors.  Frankly, we would be happy to be convinced that “[our] constituency would best be served by allowing our Board to continue to execute its plan,” as you write in your June 14 letter.  However, the lack of decisive action by the Board in the past requires us to exercise a degree of scrutiny beyond that of blind faith.

We have been with you for a long time in a relationship characterized by civility.  We both need to recognize that your strategy has not worked and our investment has been a failure.  The only question now is:  Can we bring ourselves to take the steps to set them right?  We truly believe that the post-Grum board could benefit from a candid, open review of a patient and significant shareholder’s perspective.

Please share this letter with the Board of Directors, as you obligingly have provided them with our earlier correspondence.

Sincerely yours,

Robert A.G. Monks

cc:   Richard Warner