American Pad & Paper Signs Definitive Agreement for Sale of Ampad and Forms Divisions.

Business Editors

DALLAS--(BUSINESS WIRE)--Aug. 2, 2000

American Pad & Paper Company (OTCBB:AMPPQ) (AP&P) announced today that it has signed a definitive agreement to sell its Ampad and Forms divisions to an affiliate of American Tissue Inc. for $67.1 million subject to final closing adjustments. AP&P's Ampad division is one of North America's largest suppliers of writing pads, filing supplies and retail envelopes. The Company's Forms division is one of the four largest suppliers in the forms industry today. The sale is subject to a number of conditions including bankruptcy court approval.

"We are pleased that a buyer of American Tissue's caliber has agreed to purchase both Ampad and Forms," stated James W. Swent III, AP&P's chief executive officer. "American Tissue's presence in the marketplace and financial strength will provide significant benefits for both our customers and employees."

"Acquiring Ampad and Forms will provide important pieces of American Tissue's vertical integration strategy and will afford synergies with our existing operations," stated Mehdi Gabayzadeh, American Tissue's president and chief executive officer. "Ampad and Forms have strong brand recognition and will help expand our product offerings from the mill to the consumer." The vertical integration of American Tissue's printing and writing paper business has been a focus of the company since the acquisition of the Berlin-Gorham mills in July 1999, the launch of American Tissue's affiliate, American Paper Mills of Vermont in December 1999 and the purchase of CST/Star Inc. in May 2000.

Founded in 1982, with headquarters in Hauppauge, New York, American Tissue Inc. has quickly become one of the country's largest manufacturers and distributors of consumer private label paper products as well as a major supplier of commercial and industrial paper products for the away from home market. American Tissue has domestic facilities located strategically from coast to coast as well as facilities in Mexico. Additional information on the company can be found at http://www.americantissue.com.

AP&P has been pursuing the sale of various business assets in order to reduce its debt. On May 9, AP&P concluded the sale of its Chicago-based Creative Card division to Taylor Corporation and on July 17 signed a letter of intent with Saratoga Partners for the sale of its other major business asset, the Williamhouse division. Once the sale processes for Ampad, Forms and Williamhouse are completed, AP&P and its advisors will review options for finalizing the Chapter 11 process.

American Pad & Paper Co., which invented the legal pad in 1888, is a leading manufacturer and marketer of paper-based office products in North America. Product offerings include envelopes, writing pads, file folders, machine papers, greeting cards and other office products. The key operating divisions of the Company are Williamhouse, AMPAD and Forms. AP&P has been operating under Chapter 11 protection since January 10, 2000 and has secured debtor-in-possession (DIP) financing adequate for its operations while in Chapter 11. Company revenues in 1999 were $573 million, additional information is available on the Company's Website at http://www.americanpad.com.

This release contains forward-looking statements relating to future results of AP&P. Actual results may differ significantly from these statements due to risk factors including, but not limited to the following: changing business and economic conditions; changes in customer order patterns, including loss of key customers, order cancellations or reduced sales; price and product competition; manufacturing risks; raw material availability and price changes; excess or obsolete inventory; the loss of key personnel and new product development, including acceptance of new products. Additional information, which could affect American Pad & Paper's financial results are included in AP&P's filings with the Securities and Exchange Commission.