LENS Shareholder Resolution for Temple-Inland

Mr. Clifford J. Grum, CEO
Mr. Richard Warner, Esq., Secretary

Resolved:

That the shareholders of Temple-Inland recommend that the board of directors immediately engage the services of a nationally recognized investment banker specifically to explore all alternatives to enhance the value of the company, including, but not limited to, possible sale, merger, or other transaction for any or all assets of the company.

Supporting statement:

A company that goes to the public markets for capital must be competitive for that capital. Temple-Inland’s performance has been disappointing, significantly trailing the S&P 500, S&P Paper and Forest Index, and S&P Savings and Loan Index over the last five years. If $100 were invested in Temple-Inland five years ago (November 16, 1993), it would be worth $118 today (November 16, 1998); whereas $100 would be worth $273 if invested in the S&P 500 Index, $139 if invested in the S&P Paper and Forest Index, and $304 if invested in the S&P Savings and Loan Index.

The company needs an independent review to help determine the value-enhancing potential of one or all of the following steps: a division of Temple-Inland into two separate companies—one in financial services and the other in paper & forest products; a merger between Temple-Inland’s paper business and another paper and forest products company; the divestiture of the Evadale bleached paperboard facility; the monetization of some or all of the timberlands and/or the creation of a separate forestry profit center; and the divestiture of the building products business.

We believe that Temple-Inland’s shares trade at a significant discount to the sum of the implied values of the financial and paper businesses. Our belief is that the true value exceeds 50% over the current share price. The financial services industry has experienced excellent profit growth and multiple expansion in recent years, but the value of Temple-Inland’s financial business remains suppressed. The paper and forest products industry has experienced increased global competition in recent years, resulting in over-capacity and a squeezing of margins and cash flows. While other industry players have responded to these conditions with substantial restructurings—including mergers and divestitures—Temple-Inland has failed to respond aggressively. Indeed, Temple-Inland invested heavily into their core paper businesses over the past seven years and failed to even meet their cost of capital. We also note that timber values have risen substantially during the last decade, and that these values are currently lost in the price of the stock.

At this important transitional time for the company, it is crucial that the board have the independence, expertise, and focus that a nationally recognized investment banker can provide to ensure that the right questions are raised.

If other shareholders believe, as we do, that the value of the underlying assets of this company are not reflected in the stock price, then the board and the management have not met their obligation to prove that they can add value. The board and management can best add value now by obtaining an independent valuation of the assets and of their value if sold.