-----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, SF7uXmcNtl+R5cm/y+e82tb/m5EwCjIn6ZRrl4BADBqjt3JGwYQEqm9CeajPMwHk qtTykXHf5DzrmlWZkpfvww== 0000950142-02-000692.txt : 20020710 0000950142-02-000692.hdr.sgml : 20020710 20020710165918 ACCESSION NUMBER: 0000950142-02-000692 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 20020710 GROUP MEMBERS: CAPITAL GENPAR, L.L.C. GROUP MEMBERS: CAPITAL PARTNERSHIP, L.P. GROUP MEMBERS: GROUP HOLDINGS, INC. GROUP MEMBERS: GROUP III 31, L.L.C. GROUP MEMBERS: GROUP VI 31, L.L.C. GROUP MEMBERS: J. TAYLOR CRANDALL GROUP MEMBERS: KEYSTONE, INC. GROUP MEMBERS: PACKAGING INVESTORS, L.P. GROUP MEMBERS: ROBERT M. BASS SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: PACKAGING DYNAMICS CORP CENTRAL INDEX KEY: 0001171159 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 320009217 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-78363 FILM NUMBER: 02700335 BUSINESS ADDRESS: STREET 1: 3900 WEST 43RD ST CITY: CHICAGO STATE: IL ZIP: 60632 BUSINESS PHONE: 7738438000 MAIL ADDRESS: STREET 1: 3900 WEST 43RD ST CITY: CHICAGO STATE: IL ZIP: 60632 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: KEYSTONE INC ET AL CENTRAL INDEX KEY: 0000924069 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 201 MAIN ST STREET 2: STE 3100 CITY: FORT WORTH STATE: TX ZIP: 76102 BUSINESS PHONE: 8173908400 MAIL ADDRESS: STREET 1: 201 MAIN ST STREET 2: STE 2600 CITY: FORT WORTH STATE: TX ZIP: 76102 SC 13D 1 sc13d-packaging.txt SCHEDULE 13D SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Schedule 13D** Under the Securities Exchange Act of 1934 (Amendment No. )* Packaging Dynamics Corporation (Name of Issuer) Common Stock, Par Value $.01 Per Share (Title of Class of Securities) 695160101 (Cusip Number) J. Taylor Crandall 201 Main Street, Suite 3100 Fort Worth, Texas 76102 (817) 390-8500 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) July 1, 2002 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [_]. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). The total number of shares of Common Stock reported herein is 4,272,713, which constitutes approximately 45.2% of the shares outstanding. All ownership percentages set forth herein assume that there are 9,449,719 shares outstanding. 2 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON: Packaging Investors, L.P. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS: Not Applicable - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e): [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER: 3,985,561 (1) NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH ------------------------------------------------ 8 SHARED VOTING POWER: -0- ------------------------------------------------ 9 SOLE DISPOSITIVE POWER: 3,985,561 (1) ------------------------------------------------ 10 SHARED DISPOSITIVE POWER: -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 4,889,697 (1),(2) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 51.7% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON: PN - -------------------------------------------------------------------------------- - ------------------------ 1 Power is exercised by its sole general partner, Group III 31, L.L.C. Includes 3,985,561 shares of Common Stock beneficially owned by Packaging Investors, L.P. ("Packaging Investors"). 2 See Item 6 herein. Includes 3,985,561 shares of Common Stock beneficially owned by Packaging Investors and an aggregate of 904,136 shares of Common Stock beneficially owned by DCBS, L.L.C. ("DCBS") and CB Investors, L.L.C. ("CB"). The Stockholders Agreement provides for, under certain conditions, the designation by each of Packaging Investors, and DCBS of a member of the board of directors of Packaging Dynamics Corporation (the "Company") and the election of each such designated member by all shares of the Company's Common Stock held by DCBS, CB and Packaging Investors. By virtue of the Stockholders Agreement, the Reporting Persons may be deemed to be a group with DCBS and CB within the meaning of Section 13(d)(3) of the Act, and, as a result, to have beneficial ownership of the common stock beneficially owned by DCBS and CB. The Reporting Persons disclaim such beneficial ownership and are filing the Schedule 13D on behalf of themselves and not on behalf of any other person or entity. 3 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON: Group III 31, L.L.C. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS: Not Applicable - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e): [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER: 3,985,561 (1),(2) NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH ------------------------------------------------ 8 SHARED VOTING POWER: -0- ------------------------------------------------ 9 SOLE DISPOSITIVE POWER: 3,985,561 (1), (2) ------------------------------------------------ 10 SHARED DISPOSITIVE POWER: -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 4,889,697 (1),(3) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 51.7% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON: OO - -------------------------------------------------------------------------------- - ------------------------ 1 Solely in its capacity as sole general partner of Packaging Investors. 2 Power is exercised through its president and sole member, J. Taylor Crandall. 3 See Item 6 herein. Includes 3,985,561 shares of Common Stock beneficially owned by Packaging Investors and an aggregate of 904,136 shares of Common Stock beneficially owned by DCBS and CB. The Stockholders Agreement provides for, under certain conditions, the designation by each of Packaging Investors and DCBS of a member of the board of directors of the Company and the election of each such designated member by all shares of the Company's common stock held by DCBS, CB and Packaging Investors. By virtue of the Stockholders Agreement, the Reporting Persons may be deemed to be a group with DCBS and CB within the meaning of Section 13(d)(3) of the Act, and, as a result, to have beneficial ownership of the common stock beneficially owned by DCBS and CB. The Reporting Persons disclaim such beneficial ownership and are filing the Schedule 13D on behalf of themselves and not on behalf of any other person or entity. 4 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON: J. Taylor Crandall - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS: Not Applicable - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e): [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER: 4,023,793 (1) NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH ------------------------------------------------ 8 SHARED VOTING POWER: -0- ------------------------------------------------ 9 SOLE DISPOSITIVE POWER: 4,023,793 (1) ------------------------------------------------ 10 SHARED DISPOSITIVE POWER: -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 4,927,929 (2) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 52.1% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON: IN - -------------------------------------------------------------------------------- - ------------------------ 1 Solely in his capacity as sole member of Group VI 31, L.L.C., the sole member of Capital GenPar, L.L.C., the sole general partner of Capital Partnership, L.P., with respect to 36,144 shares of the Common Stock and solely in its capacity as sole member of Group III 31, L.L.C., the sole general partner of Packaging Investors, with respect to 3,985,561 shares of the Common Stock. 2 Solely in his capacity as (1) sole member of Group VI 31, L.L.C., the sole member of Capital GenPar, L.L.C., the sole general partner of Capital Partnership with respect to 36,144 shares of the Common Stock and (2) sole member of Group III 31, L.L.C., the sole general partner of Packaging Investors with respect to 4,889,697 shares of the Common Stock (including 3,985,561 shares of Common Stock beneficially owned by Packaging Investors and an aggregate of 904,136 shares of Common Stock beneficially owned by DCBS and CB). By virtue of the Stockholders Agreement, the Reporting Persons may be deemed to be a group with DCBS and CB within the meaning of Section 13(d)(3) of the Act, and, as a result, to have beneficial ownership of the common stock beneficially owned by DCBS and CB. The Reporting Persons disclaim such beneficial ownership and are filing the Schedule 13D on behalf of themselves and not on behalf of any other person or entity. 5 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON: Group Holdings, Inc. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS: Not Applicable - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e): [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER: 138 (1) NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH ------------------------------------------------ 8 SHARED VOTING POWER: -0- ------------------------------------------------ 9 SOLE DISPOSITIVE POWER: 138 (1) ------------------------------------------------ 10 SHARED DISPOSITIVE POWER: -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 138 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): less than 0.1% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON: CO - -------------------------------------------------------------------------------- - ------------------------ 1 Power is exercised through its sole stockholder, Keystone, Inc. 6 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON: Capital Partnership, L.P. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS: Not Applicable - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e): [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER: 36,144 (1) NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH ------------------------------------------------ 8 SHARED VOTING POWER: -0- ------------------------------------------------ 9 SOLE DISPOSITIVE POWER: 36,144 (1) ------------------------------------------------ 10 SHARED DISPOSITIVE POWER: -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 36,144 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 0.4% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON: PN - -------------------------------------------------------------------------------- - ------------------------ 1 Power is exercised by its sole general partner, Group VI 31, L.L.C. 7 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON: Capital GenPar, L.L.C. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS: Not Applicable - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e): [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER: 36,144 (1),(2) NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH ------------------------------------------------ 8 SHARED VOTING POWER: -0- ------------------------------------------------ 9 SOLE DISPOSITIVE POWER: 36,144 (1),(2) ------------------------------------------------ 10 SHARED DISPOSITIVE POWER: -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 36,144 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 0.4% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON: OO - -------------------------------------------------------------------------------- - ------------------------ 1 Solely in its capacity as sole general partner of Capital Partnership, L.P. 2 Power is exercised by its sole member, Group VI 31, L.L.C. 8 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON: Group VI 31, L.L.C. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS: Not Applicable - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e): [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION: Delaware - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER: 36,144 (1),(2) NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH ------------------------------------------------ 8 SHARED VOTING POWER: -0- ------------------------------------------------ 9 SOLE DISPOSITIVE POWER: 36,144 (1),(2) ------------------------------------------------ 10 SHARED DISPOSITIVE POWER: -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 36,144 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 0.4% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON: OO - -------------------------------------------------------------------------------- - ------------------------ 1 Solely in its capacity as sole general partner of Capital Partnership, L.P. 2 Power is exercised through its president and sole member, J. Taylor Crandall. 9 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON: Keystone, Inc. - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS: Not Applicable - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e): [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION: Texas - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER: 196,959 (1) NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH ------------------------------------------------ 8 SHARED VOTING POWER: -0- ------------------------------------------------ 9 SOLE DISPOSITIVE POWER: 196,959 (1) ------------------------------------------------ 10 SHARED DISPOSITIVE POWER: -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 196,959 (1) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 2.1% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON: CO - -------------------------------------------------------------------------------- - ------------------------ 1 Power is exercised through its president and sole director, Robert M. Bass. Solely in its capacity as sole stockholder of Group Holdings, Inc. with respect to 138 shares of the Common Stock. 10 - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON: Robert M. Bass - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [_] (b) [X] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS: Not Applicable - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e): [_] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION: USA - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER: 248,920 (1) NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH ------------------------------------------------ 8 SHARED VOTING POWER: -0- ------------------------------------------------ 9 SOLE DISPOSITIVE POWER: 248,920 (1) ------------------------------------------------ 10 SHARED DISPOSITIVE POWER: -0- - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON: 248,920 (1) - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES: [_] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 2.6% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON: IN - -------------------------------------------------------------------------------- - ------------------------ 1 Solely in his capacity as president and sole director of Keystone, Inc. with respect to 196,821 shares of Common Stock and solely in his capacity as president and sole director of Keystone, the sole stockholder of Group Holdings, Inc., with respect to 138 shares of Common Stock. 11 1. SECURITY AND ISSUER. This statement relates to the common stock, par value $.01 per share (the "Common Stock"), of Packaging Dynamics Corporation, a Delaware corporation (the "Company"). The address of the principal executive offices of the Company is 3900 West 43rd Street, Chicago, Illinois 60632. 2. IDENTITY AND BACKGROUND. (a) Pursuant to Rule 13d-1(a) of Regulation 13D-G of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended (the "Act"), and the agreement to the joint filing of this statement, attached hereto as Exhibit 4, the undersigned hereby jointly file this Schedule 13D Statement on behalf of Packaging Investors, L.P., a Delaware limited liability partnership ("Packaging Investors"), Group III 31, L.L.C., a Delaware limited liability company ("Group III"), J. Taylor Crandall, an individual ("Crandall"), Group Holdings, Inc., a Delaware corporation ("Group Holdings"), Capital Partnership, L.P., a Delaware limited partnership ("Capital Partnership"), Capital GenPar, L.L.C., a Delaware limited liability company ("Capital GenPar"), Group VI 31, L.L.C., a Delaware limited liability company ("Group VI"), Keystone, Inc., a Texas corporation ("Keystone") and Robert M. Bass, an individual ("Bass"). Packaging Investors, Group III, Crandall, Group Holdings, Capital Partnership, Capital GenPar, Group VI, Keystone and Bass are sometimes hereinafter collectively referred to as the "Reporting Persons." The Reporting Persons are making this single, joint filing because they may be deemed to constitute a "group" within the meaning of Section 13(d)(3) of the Act, although neither the fact of this filing nor anything contained herein shall be deemed to be an admission by the Reporting Persons that a group exists. The Stockholders Agreement among the Company, DCBS, CB and Packaging Investors provides for, under certain conditions, the designation by each of Packaging Investors, and DCBS of a member of the board of directors of the Company and the election of each such designated member by all shares of the Company's Common Stock held by DCBS, CB and Packaging Investors. By virtue of the Stockholders Agreement, the Reporting Persons may be deemed to be a group with DCBS and CB within the meaning of Section 13(d)(3) of the Act, and, as a result, to have beneficial ownership of the common stock beneficially owned by DCBS and CB. The Reporting Persons disclaim such beneficial ownership, are filing the Schedule 13D on behalf of themselves and not on behalf of any other person or entity and understand that DCBS and CB are filing a separate Schedule 13D. (b) and (c) Packaging Investors is a Delaware limited partnership, the principal business of which is to own an equity interest in the Company. The principal business address of Packaging Investors is c/o Group III 31, L.L.C., 201 Main Street, Suite 3100, Fort Worth, Texas 76102. Group III is the sole general partner of Packaging Investors Group III is a Delaware limited liability company, the principal business of which is the purchase, sale, acquisition and holding of investment securities. The principal 12 business address of Group III, which also serves as its principal office, is 201 Main Street, Suite 3100, Fort Worth, Texas 76102. Crandall is the sole member of Group III. Pursuant to Instruction C to Schedule 13D of the Act, the name, residence or business address, and present principal occupation or employment of each director, executive officer and controlling person of Group III is as follows: RESIDENCE OR PRINCIPAL OCCUPATION NAME BUSINESS ADDRESS OR EMPLOYMENT - ---- ---------------- -------------- Crandall 201 Main Street, Suite 3100 Vice President Fort Worth, Texas 76102 and Chief Operating Officer of Keystone W.R. Cotham 201 Main Street, Suite 2600 Vice President/ Fort Worth, Texas 76102 Controller of Bass Enterprises Production Co. ("BEPCO") Gary W. Reese 201 Main Street, Suite 2600 Treasurer of Fort Worth, Texas 76102 BEPCO BEPCO is a Texas corporation, the principal business of which is oil exploration and drilling, and producing hydrocarbons. The principal business address of BEPCO, which also serves as its principal office, is 201 Main Street, Suite 2600, Fort Worth, Texas 76102. The principal occupation of Crandall is Vice President and Chief Operating Officer of Keystone, Inc. The principal business address of Crandall is 201 Main Street, Suite 3100, Fort Worth, Texas 76102. Group Holdings, Inc. is a Delaware corporation, the principal business of which is the purchase, sale, acquisition and holding of investment securities. The principal business address of Group Holdings, which also serves as its principal office, is 201 Main Street, Suite 3100, Fort Worth, Texas 76102. Keystone is the sole stockholder of Group Holdings. Pursuant to Instruction C to Schedule 13D of the Act, the name, residence or business address, and present principal occupation or employment of each director, executive officer and controlling person of Group Holdings is as follows: RESIDENCE OR PRINCIPAL OCCUPATION NAME BUSINESS ADDRESS OR EMPLOYMENT - ---- ---------------- -------------- Robert M. Bass 201 Main Street, Suite 3100 President of Fort Worth, Texas 76102 Keystone. Crandall See above. See above. W.R. Cotham See above. See above. 13 Capital Partnership, L.P. is a Delaware limited partnership, the principal business of which is investing in public and private debt and equity securities. The principal business address of Capital Partnership, which also serves as its principal office, is 201 Main Street, Suite 3100, Fort Worth, Texas 76102. Capital GenPar is the sole general partner of Capital Partnership. Capital GenPar, L.L.C. is a Delaware limited liability company, the principal business of which is serving as the general partner of Capital Partnership. The principal business address of Capital GenPar, which also serves as its principal office, is 201 Main Street, Suite 3100, Fort Worth, Texas 76102. Group VI is the sole member of Capital GenPar. Pursuant to Instruction C to Schedule 13D of the Act, the name, residence or business address, and present principal occupation or employment of each director, executive officer and controlling person of Capital GenPar is as follows: RESIDENCE OR PRINCIPAL OCCUPATION NAME BUSINESS ADDRESS OR EMPLOYMENT - ---- ---------------- -------------- Crandall See above. See above. W.R. Cotham See above. See above. Gary W. Reese See above. See above. Group VI is a Delaware limited liability company, the principal business of which is the purchase, sale, acquisition and holding of investment securities. The principal business address of Group VI, which also serves as its principal office, is 201 Main Street, Suite 3100, Fort Worth, Texas 76102. Crandall is the sole member of Group VI. Pursuant to Instruction C to Schedule 13D of the Act, the name, residence or business address, and present principal occupation or employment of each director, executive officer and controlling person of Group VI is as follows: RESIDENCE OR PRINCIPAL OCCUPATION NAME BUSINESS ADDRESS OR EMPLOYMENT - ---- ---------------- -------------- Crandall See above. See above. W.R. Cotham See above. See above. Gary W. Reese See above. See above. Keystone is a Texas corporation, the principal businesses of which are investment in marketable securities, real estate investment and development, ownership and operation of oil and gas properties (through Bass Enterprises Production Co.), the ownership and operation of gas processing plants and carbon black plants (through various partnerships) and the ownership of interests in entities engaged in a wide variety 14 of businesses. The principal business address of Keystone, which also serves as its principal office, is 201 Main Street, Suite 3100, Fort Worth, Texas 76102. Pursuant to Instruction C to Schedule 13D of the Act, the name, residence or business address, and present principal occupation or employment of each director, executive officer and controlling person of Keystone is as follows: RESIDENCE OR PRINCIPAL OCCUPATION NAME BUSINESS ADDRESS OR EMPLOYMENT - ---- ---------------- -------------- Robert M. Bass See above. See above. Crandall See above. See above. James N. Alexander 201 Main Street, Suite 3100 Vice President- Fort Worth, Texas 76102 Finance of Keystone Stratton Heath 201 Main Street, Suite 3100 Treasurer of Fort Worth, Texas 76102 Keystone The principal occupation of Bass is president of Keystone. His principal business address, which also serves as his principal office, is 201 Main Street, Suite 3100, Fort Worth, Texas 76102. 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. Pursuant to the terms of a letter agreement, dated March 18, 2002 , among Ivex Packaging Corporation, a Delaware corporation ("Ivex"), DCBS, CB and Packaging Investors (the "Letter Agreement," attached hereto as Exhibit 2), on July 1, 2002, DCBS, CB, Packaging Investors and a wholly-owned subsidiary of Ivex contributed to the Company (the "Contribution") all of the ownership interests in Packaging Holdings, L.L.C. in exchange for 100% of the Company's issued and outstanding Common Stock as follows: ENTITY NUMBER OF SHARES ------ ---------------- Packaging Investors......................... 3,985,561 DCBS........................................ 736,144 CB.......................................... 167,992 Ivex........................................ 4,548,050 No monetary consideration was paid by the Reporting Persons to acquire the shares of Common Stock in connection with the Contribution. Crandall, Group Holdings, Capital Partnership, Keystone and Bass acquired shares of the Common Stock on July 1, 2002 in connection with the distribution by Ivex of its 4,548,050 shares of Common Stock to its stockholders and certain of its option holders; thus, no monetary consideration was paid by Crandall, Group Holdings, Capital Partnership, Keystone or Bass in acquiring these shares. 15 4. PURPOSE OF TRANSACTION. The Reporting Persons acquired and continue to hold the Common Stock reported herein for investment purposes. Depending on market conditions and other factors that the Reporting Persons may deem material to their respective investment decisions, the Reporting Persons may purchase additional stock in the open market or in private transactions. Depending on these same factors, the Reporting Persons may sell all or a portion of the Common Stock in private transactions. In addition, in connection with the Contribution, DCBS, CB, Packaging Investors and the Company entered into the Stockholders Agreement and Registration Rights Agreement (each as described in Item 6 below), which contain provisions regarding, among other things, the acquisition, registration, disposition and voting of shares of Common Stock as well as certain provisions regarding the composition of the Company's board of directors (the "Board"). Except as set forth in this Item 4, the Reporting Persons have no present plans or proposals which relate to or would result in any of the events described in clauses (a) through (j) of the instructions to Item 4 of Schedule 13D of the Act. 5. INTEREST IN SECURITIES OF THE ISSUER. (a) PACKAGING INVESTORS The aggregate number of shares of Common Stock that Packaging Investors may be deemed to own beneficially, pursuant to Rule 13d-3(d)(1)(i) of the Act, is 4,889,697 (including 3,985,561 shares of Common Stock beneficially owned by Packaging Investors and an aggregate of 904,136 shares of Common Stock beneficially owned by DCBS and CB), which constitute approximately 51.7% of the outstanding shares of Common Stock. By virtue of the Stockholders Agreement, the Reporting Persons may be deemed to be a group with DCBS and CB within the meaning of Section 13(d)(3) of the Act, and, as a result, to have beneficial ownership of the common stock beneficially owned by DCBS and CB. Packaging Investors disclaims such beneficial ownership. GROUP III Because of its position as the sole general partner of Packaging Investors, Group III may, pursuant to Rule 13d-3 of the Act, be deemed to be the beneficial owner of 4,889,697 shares of Common Stock (including 3,985,561 shares of Common Stock beneficially owned by Packaging Investors and an aggregate of 904,136 shares of Common Stock beneficially owned by DCBS and CB), which constitute approximately 51.7% of the outstanding shares of Common Stock. By virtue of the Stockholders Agreement, the Reporting Persons may be deemed to be a group with DCBS and CB within the meaning of Section 13(d)(3) of the Act, and, as a 16 result, to have beneficial ownership of the common stock beneficially owned by DCBS and CB. Group III disclaims such beneficial ownership. CRANDALL Because of his position as (1) sole member of Group III, the sole general partner of Packaging Investors with respect to 4,889,697 shares of Common Stock (including 3,985,561 shares of Common Stock beneficially owned by Packaging Investors and an aggregate of 904,136 shares of Common Stock beneficially owned by DCBS and CB) and (2) sole member of Group VI, the sole member of Capital GenPar, the sole general partner of Capital Partnership with respect to 36,144 shares of Common Stock and because of his individual ownership of 2,088 shares of Common Stock, Crandall may, pursuant to Rule 13d-3 of the Act, be deemed to be the beneficial owner of 4,927,929 shares of Common Stock, which constitute approximately 52.1% of the outstanding shares of Common Stock. By virtue of the Stockholders Agreement, the Reporting Persons may be deemed to be a group with DCBS and CB within the meaning of Section 13(d)(3) of the Act, and, as a result, to have beneficial ownership of the common stock beneficially owned by DCBS and CB. By virtue of the Stockholders Agreement, the Reporting Persons may be deemed to be a group with DCBS and CB within the meaning of Section 13(d)(3) of the Act, and, as a result, to have beneficial ownership of the common stock beneficially owned by DCBS and CB. Crandall disclaims such beneficial ownership. GROUP HOLDINGS The aggregate number of shares of Common Stock that Group Holdings owns beneficially, pursuant to Rule 13d-3(d)(1)(i) of the Act, is 138, which constitute less than 0.1% of the outstanding shares of Common Stock. CAPITAL PARTNERSHIP The aggregate number of shares of Common Stock that Capital Partnership owns beneficially, pursuant to Rule 13d-3(d)(1)(i) of the Act, is 36,144, which constitute approximately 0.4% of the outstanding shares of Common Stock. CAPITAL GENPAR Because of its position as the sole general partner of Capital Partnership, Capital GenPar may, pursuant to Rule 13d-3 of the Act, be deemed to be the beneficial owner of 36,144 shares of Common Stock, which constitute approximately 0.4% of the outstanding shares of Common Stock. GROUP VI Because of its position as the sole member of Capital Par, the sole general partner of Capital Partnership, Group VI may, pursuant to Rule 13d-3 of the Act, be deemed to be 17 the beneficial owner of 36,144 shares of Common Stock, which constitute approximately 0.4% of the outstanding shares of Common Stock. KEYSTONE The aggregate number of shares of Common Stock that Keystone owns beneficially, pursuant to Rule 13d-3 of the Act is 196,959 (including 138 shares of Common Stock because of its position as sole stockholder of Group Holdings), which constitutes approximately 2.1% of the outstanding shares of Common Stock. BASS Because of its position as (1) president and sole director of Keystone and (2) sole director of Keystone, the sole stockholder of Group Holdings, and because of his individual ownership of 51,961 shares of Common Stock, Bass may, pursuant to Rule 13d-3 of the Act, be deemed to be the beneficial owner of 248,920 shares of Common Stock, which constitute approximately 2.6% of the outstanding shares of Common Stock. (b) PACKAGING INVESTORS Packaging Investors has sole power to vote or to direct the vote and to dispose or to direct the disposition of 3,985,561 shares of Common Stock. GROUP III As the sole general partner of Packaging Investors, Group III has sole power to vote or to direct the vote and to dispose or to direct the disposition of 3,985,561 shares of Common Stock. CRANDALL Because of his position as sole member of Group III, the sole general partner of Packaging Investors Crandall with respect to 3,985,561 shares of Common Stock and sole member of Group VI, the sole general 18 member of Capital GenPar, the sole general partner of Capital Partnership with respect to 36,144 shares of Common Stock and because of his individual ownership of 2,088 shares of Common Stock, Crandall has sole power to vote or to direct the vote and to dispose or to direct the disposition of an aggregate of 4,023,793 shares of Common Stock. GROUP HOLDINGS Group Holdings has sole power to vote or to direct the vote and to dispose or to direct the disposition of 138 shares of Common Stock. CAPITAL PARTNERSHIP Capital Partnership has sole power to vote or to direct the vote and to dispose or to direct the disposition of 36,144 shares of Common Stock. CAPITAL GENPAR Because of its position as sole general partner of Capital Partnership, Capital GenPar has sole power to vote or to direct the vote and to dispose or to direct the disposition of 36,144 shares of Common Stock. GROUP VI Because of its position as sole member of Capital GenPar, the sole general partner of Capital Partnership, Group VI has sole power to vote or to direct the vote and to dispose or to direct the disposition of 36,144 shares of Common Stock. KEYSTONE Acting through Bass, its president and sole director, Keystone has sole power to vote or to direct the vote and to dispose or to direct the disposition of 196,959 shares of Common Stock (including 138 shares in its capacity as sole stockholder of Group Holdings). BASS As sole director and president of Keystone, Bass has sole power to vote or to direct the vote and to dispose or to direct the disposition of 196,959 shares of Common Stock (including 138 shares in Keystone's capacity as sole stockholder of Group Holdings). 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. The information set forth in Item 4 of this Schedule 13D is hereby incorporated by reference. 19 STOCKHOLDERS AGREEMENT. In connection with the Contribution, the Company, DCBS, CB and Packaging Investors entered into a Stockholders Agreement, dated as of July 1, 2002 (the "Stockholders Agreement"). The Stockholders Agreement provides for Packaging Investors and DCBS each to designate a member of the Board on the following terms: o Until the date on which Packaging Investors ceases to own at least 20.0% of the outstanding shares of the Common Stock, the Company will, at each annual meeting of the Company's stockholders, nominate or cause to be nominated one individual designated by Packaging Investors for election to the Board, and Packaging Investors, DCBS and CB will vote any shares then owned by any of them to elect the Packaging Investors designee. o Until the date on which DCBS Investors and CB Investors cease to own at least 5.0% of the outstanding shares of the Common Stock, the Company will, at each annual meeting of the Company's stockholders, nominate or cause to be nominated one individual designated by DCBS for election to the Board, and Packaging Investors, DCBS and CB will vote any shares then owned by any of them to elect the DCBS designee. Packaging Investors, DCBS and CB are also required to vote their shares at a special meeting and take other action in cooperation with any attempt by either Packaging Investors or DCBS to remove its own designee from the Board. Until the date when Packaging Investors ceases to own 33.0% of the outstanding Common Stock, the Company is prohibited by the Stockholders Agreement from engaging in, or entering into an agreement to engage in, any of the following without the consent of Packaging Investors: o any creation, incurrence, guarantee, refinancing or assumption of indebtedness by the Company or any subsidiary in excess of $15 million; o any acquisition of any business, assets (other than the procurement of assets in the ordinary course of business), securities of, or investment in, or loan or advance to, any person (other than any loans, advances or contributions to any wholly-owned subsidiaries), by the Company or any subsidiary, in any transaction or series of related transactions, in an aggregate amount exceeding $10 million; o any transfer of assets in excess of $10 million by the Company or any subsidiary (other than in the ordinary course of business and transfers to a wholly-owned subsidiary); o the issuance by the Company or any subsidiary of any equity securities, except pursuant to the Packaging Dynamics Corporation 2002 Long Term Incentive Stock Plan; o any merger, consolidation, amalgamation, recapitalization or other form of business combination, or any liquidation, winding up or dissolution of the Company or any material subsidiary (other than a merger of any wholly-owned subsidiaries with and into each other or the Company); 20 o the Company or any subsidiary engaging in any business other than any of the businesses conducted by the Company or a subsidiary on the date of the Stockholders Agreement; o any material amendment to the certificate of incorporation or bylaws of the Company or any similar constituent documents of any subsidiary; o any dividend or distribution with respect to, or any redemption or repurchase of, any equity securities of the Company; o except as provided in any applicable annual budget, any expenditures, commitments, obligations or agreements by the Company or any subsidiary in excess of $5 million; o any material transaction or series of related transactions between the Company or any subsidiary, on the one hand, and any party to the Stockholders Agreement or any affiliate of such party, on the other hand; and o the adoption of any annual budget of the Company prepared for the Company and its subsidiaries for a succeeding fiscal year which is materially inconsistent with the annual budget then in effect, or any material amendment to an annual budget in any fiscal year The Stockholders Agreement also provides for transfer restrictions on the Common Stock held by Packaging Investors, DCBS and CB, including the following: o NOTICE AND COMPLIANCE WITH SECURITIES LAWS. Prior to making any voluntary disposition of any of their shares of the Common Stock (other than a disposition to the Company, to any party to the Stockholders Agreement or under an effective registration statement under the Securities Act of 1933, as amended (the "Securities Act")), Packaging Investors, DCBS and CB will notify the Company and refrain from the proposed disposition until notified by the Company that either (1) registration under federal and state securities laws is not required or (2) registration under or compliance with the applicable federal or state securities laws has been effected. o RIGHT OF FIRST REFUSAL. If DCBS or CB wishes to dispose of any shares of the Common Stock for cash (other than to the Company, to any party to the Stockholders Agreement, to a related party, to its members, partners or stockholders, pursuant to Rule 144 under the Securities Act or under an effective registration statement under the Securities Act), then the Company and Packaging Investors have the right to purchase such shares at the price offered by the third party. o DRAG-ALONG RIGHT. In the event that Packaging Investors wishes to sell all of its shares of the Common Stock to a third-party purchaser for cash and DCBS and CB have not completely distributed their shares of Common Stock to their respective members, Packaging Investors has the right to require DCBS and CB to sell all shares of their Common Stock to such third-party purchaser for the same per share consideration as would be received by Packaging Investors. 21 o TAG-ALONG RIGHT. In the event of a proposed sale to a third party by Packaging Investors or its affiliates of shares of Common Stock representing more than 33.0% of the shares of the Common Stock owned by Packaging Investors as of the date of the Stockholders Agreement, DCBS and CB have the right to require, as a condition to the proposed sale, that the third-party purchaser simultaneously purchase a proportionate number of shares of Common Stock from each of DCBS and CB at the same price per share as that to be received from the third party by Packaging Investors. REGISTRATION RIGHTS AGREEMENT. Additionally, in connection with the Contribution, the Company, DCBS, CB and Packaging Investors entered into a Registration Rights Agreement, dated as of July 1, 2002 (the "Registration Rights Agreement"). Pursuant to the Registration Rights Agreement, DCBS, CB and Packaging Investors will have the right to require the Company to register their shares of Common Stock for sale in the public markets. They will also have piggyback registration rights to include their shares in any registration statement the Company files on its own behalf (other than for employee benefit plans and business acquisitions or corporate restructuring) or on behalf of other stockholders. In addition, these stockholders will have the right to request the Company to register their shares of Common Stock on a short-form registration statement on up to three occasions. References to, and descriptions of, the Stockholders Agreement and the Registration Rights Agreement in this Item 6 are qualified in their entirety by reference to the copies of the Stockholders Agreement and the Registration Rights Agreement which are included as Exhibit 3 and Exhibit 4, respectively, to this statement and which are incorporated by reference in this Item 6 in their entirety where such references and descriptions appear. Except as set forth herein or in the Exhibits filed or to be filed herewith, there are no contracts, arrangements, understandings or relationships with respect to the Common Stock owned by the Item 2 Persons. 7. MATERIAL TO BE FILED AS EXHIBITS. Exhibit 1-- Stockholders Agreement, dated as of July 1, 2002, by and among Packaging Investors, L.P., DCBS Investors, L.L.C. and CB Investors, L.L.C., filed herewith. Exhibit 2-- Registration Rights Agreement, dated as of July 1, 2002, Packaging Investors, L.P., DCBS Investors, L.L.C., CB Investors, L.L.C. and Packaging Dynamics Corporation, filed herewith. Exhibit 3 -- Joint Filing Agreement pursuant to Rule 13d-1(k)(1)(iii) among the Reporting Persons, filed herewith. Exhibit 4 -- Letter Agreement, dated March 18, 2002, among Ivex Packaging Corporation, DCBS Investors, L.L.C., CB Investors, L.L.C. and Packaging Investors, L.P., filed herewith. 22 After reasonable 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. DATED: July 10, 2002 PACKAGING INVESTORS, L.P. By: GROUP III 31, L.L.C., general partner By: /s/ Kevin G. Levy --------------------------------------- Kevin G. Levy, Vice President GROUP III 31, L.L.C. By: /s/ Kevin G. Levy --------------------------------------- Kevin G. Levy, Vice President /s/ Kevin G. Levy -------------------------------------------- KEVIN G. LEVY As Attorney-in-Fact for J. TAYLOR CRANDALL (1) GROUP HOLDINGS, INC. By: /s/ Kevin G. Levy --------------------------------------- Kevin G. Levy, Vice President CAPITAL PARTNERSHIP, L.P. By: CAPITAL GENPAR, L.L.C, general partner By: GROUP VI 31, L.L.C., sole member By: /s/ Kevin G. Levy --------------------------------------- Kevin G. Levy, Vice President CAPITAL GENPAR, L.L.C, By: GROUP VI 31, L.L.C., sole member By: /s/ Kevin G. Levy --------------------------------------- Kevin G. Levy, Vice President - ------------------------ 1 Power of Attorney authorizing Kevin G. Levy, et al., to act on behalf of J. Taylor Crandall previously has been filed with the Securities and Exchange Commission. 24 GROUP VI 31, L.L.C. By: /s/ Kevin G. Levy --------------------------------------- Kevin G. Levy, Vice President KEYSTONE, INC. By: /s/ Kevin G. Levy --------------------------------------- Kevin G. Levy, Vice President /s/ Kevin G. Levy -------------------------------------------- KEVIN G. LEVY As Attorney-in-Fact for: ROBERT M. BASS (1) - ------------------------ 1 Power of Attorney authorizing Kevin G. Levy, et al., to act on behalf of Robert M. Bass previously has been filed with the Securities and Exchange Commission. 24 EXHIBIT INDEX DESCRIPTION Exhibit 1-- Stockholders Agreement, dated as of July 1, 2002, by and among Packaging Investors, L.P., DCBS Investors, L.L.C. and CB Investors, L.L.C., filed herewith Exhibit 2-- Registration Rights Agreement, dated as of July 1, 2002, Packaging Investors, L.P., DCBS Investors, L.L.C., CB Investors, L.L.C. and Packaging Dynamics Corporation, filed herewith. Exhibit 3 -- Joint Filing Agreement pursuant to Rule 13d-1(k)(1)(iii) among the Reporting Persons, filed herewith. Exhibit 4 -- Letter Agreement, dated March 18, 2002, among Ivex Packaging Corporation, DCBS Investors, L.L.C., CB Investors, L.L.C. and Packaging Investors, L.P., filed herewith. EX-99 3 ex1sc13d-packaging.txt EXHIBIT 1 EXHIBIT 1 --------- PACKAGING DYNAMICS CORPORATION STOCKHOLDERS AGREEMENT This Stockholders Agreement (this "Agreement") is entered into as of July 1, 2002 (the "Effective Date"), among Packaging Dynamics Corporation, a Delaware corporation (the "Company"), DCBS Investors, L.L.C., a Delaware limited liability company ("DCBS"), CB Investors, L.L.C., a Delaware limited liability company ("CB"), and Packaging Investors, L.P., a Delaware limited partnership ("Packaging Investors" and together with DCBS and CB, collectively, the "Stockholders"). The Company and the Stockholders desire to enter into an agreement concerning, INTER ALIA, the continuity of management of the Company and the disposition by the Stockholders of the shares of common stock of the Company. In consideration of the foregoing and the mutual covenants contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. DEFINITIONS. The following terms shall have the following definitions for the purposes of this Agreement: "Act" means the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the Commission thereunder, all as the same shall at that time be in effect. "Affiliate" of any person or entity is any other person or entity controlling, controlled by or under common control with such person or entity. "Board" means the Board of Directors of the Company. "Closing Date" means the date of the closing of the Merger (as such term is defined in the Agreement and Plan of Merger, dated March 18, 2002, by and among Alcoa Inc., AI Merger Sub Inc. and Ivex Packaging Corporation). 1 "Commission" means the Securities and Exchange Commission. "Common Stock" means the Company's common stock, par value $.01 per share, as constituted on the date hereof, any stock into which such common stock shall have been changed or any stock resulting from any reclassification of such common stock, and all other stock of any class or classes (however designated) of the Company, the holders of which have the right, without limitation as to amount, either to all or to a share of the balance of current dividends and liquidating dividends after the payment of dividends and distributions of any shares entitled to preference. "GAAP" means the generally accepted accounting principles in the United States of America which are applicable on the date hereof. "Person" means an individual, partnership, corporation, trust or unincorporated organization or a government or a political subdivision thereof. "Registration Rights Agreement" means the Registration Rights Agreement, dated the date hereof, among the Stockholders and the Company. "Shares" means shares of Common Stock. "subsidiary" means any corporation, partnership or other entity or organization of which a majority of the securities or other interests, having by their terms ordinary voting power to elect a majority of the board of directors or others performing similar functions, is directly or indirectly owned or controlled by the Company, by any one or more subsidiaries, or by the Company and one or more subsidiaries. 2. COVENANTS REGARDING DISPOSITION OF SHARES BY THE STOCKHOLDERS. Each Stockholder agrees that prior to making any voluntary disposition of any Shares (other than a disposition to the Company, another Stockholder or pursuant to an effective registration statement under the Act as permitted by the Registration Rights Agreement), such Stockholder will give written notice to the Company, describing the manner of such proposed disposition. Each Stockholder further agrees that such proposed disposition will not be effected until: (a) the Company has notified such Stockholder that either: (i) in the opinion of counsel reasonably acceptable to the Company, no registration of such Shares under that Act is 2 required in connection with such proposed disposition; or (ii) a registration statement under the Act covering such proposed disposition has been filed by the Company with the Commission and has become effective under the Act; and (b) the Company has notified such Stockholder that either: (i) in the opinion of counsel reasonably acceptable to the Company no registration or qualification under the securities or "blue sky" laws of any state is required in connection with such proposed disposition; or (ii) compliance with applicable state securities or "blue sky" laws has been effected. The Company will use its best efforts to respond to any such notice from the Stockholder within fifteen (15) days after receipt thereof. In the case of any proposed disposition under this Section 2, the Company will use its best efforts to comply with any such applicable state securities or "blue sky" laws, but shall in no event be required, in connection therewith, to qualify to do business in any state where it is not then qualified to do business or to take any action that would subject it to tax or to the general service of process in any state where it is not then subject. The restrictions on transfer contained in this Section 2 shall be in addition to, and not by way of limitation of, any other restrictions on transfer contained in any other Section of this Agreement. 3. LEGEND ON STOCK CERTIFICATES. Each certificate representing Shares which are subject to this Agreement shall be endorsed with the following legend (in addition to any legend required by applicable state securities or "blue sky" laws): "THE SECURITIES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A PRIVATE PLACEMENT, WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). NO SALE, TRANSFER OR OTHER DISPOSITION OF SUCH SECURITIES SHALL BE VALID OR EFFECTIVE UNLESS EFFECTED IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS AND THE RESTRICTIONS ON TRANSFER SET FORTH IN A STOCKHOLDERS AGREEMENT DATED AS OF JULY 1, 2002, AND ANY AMENDMENTS THERETO, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE OFFICES OF THE COMPANY. NO TRANSFER OF SUCH SECURITIES WILL BE MADE ON THE BOOKS OF THE COMPANY UNLESS ACCOMPANIED BY EVIDENCE OF COMPLIANCE WITH THE TERMS OF SUCH STOCKHOLDERS AGREEMENT." Any stock certificate issued at any time in exchange or 3 substitution for any certificate bearing such legend (except a new certificate issued upon the completion of a public distribution of securities of the Company represented thereby) shall also bear such legend, unless in the opinion of counsel, reasonably acceptable to the Company, the Shares represented thereby need no longer be subject to restrictions contained in Section 2 of this Agreement. The Company agrees that it will not transfer on its books any certificate for Shares in violation of the provisions of this Agreement. 4. TRANSFER RESTRICTIONS ON SHARES. (a) CERTAIN TRANSFERS OF SHARES VOID. Each Stockholder agrees that such Stockholder will not sell, transfer or dispose of (hereinafter collectively called "transfer") any Shares or any stock certificate representing the same now or hereafter at any time owned by such Stockholder without complying with the provisions of Section 4(b), (c) and (d) of this Agreement; PROVIDED, HOWEVER, that nothing contained in Sections 4(b), 4(c) or 4(d) shall prevent or restrict a Stockholder from distributing, from time to time, its Shares to its members, partners or stockholders, as the case may be. Any transfer of the Shares in violation of this subsection (a) shall be void AB INITIO. (b) RIGHT OF FIRST REFUSAL TO PURCHASE COMMON STOCK. (i) TRANSFER NOTICE. If DCBS or CB desires to sell for cash all or any portion of its Shares to any Person (other than to the Company, another Stockholder, an Affiliate, pursuant to Rule 144, pursuant to an effective registration statement under the Act or to its members, partners or stockholders) (a "Third-Party Purchaser") pursuant to a bona-fide offer from such Third-Party Purchaser, the selling Stockholder (the "Selling Stockholder") shall give written notice (the "Transfer Notice") to the Company and to Packaging Investors setting forth such desire and the cash price of such Shares (the "Offered Shares"). (ii) COMPANY OPTION. Upon the giving of such Transfer Notice, the Company shall have the first option (but not the obligation) to purchase all, but not less than all, of the Offered Shares at the cash price specified in the Transfer Notice by giving a written notice (the "Election Notice") to the Selling Stockholder and Packaging Investors within fifteen (15) days after the date of the Transfer Notice. The failure by the Company to deliver the Election Notice within fifteen (15) days after the date of the Transfer Notice shall operate as a waiver 4 of the Company's rights under this Section 4(b)(ii). (iii) PACKAGING INVESTORS OPTION. If the Company fails to deliver the Election Notice within fifteen (15) days after the date of the Transfer Notice, then Packaging Investors shall have the right (but not the obligation) to purchase all, but not less than all, of the Offered Shares at the cash price specified in the Transfer Notice by giving a written notice (the "Second Election Notice") to the Selling Stockholder and the Company within fifteen (15) days after the earlier to occur of (A) the Company expressly declines in writing to purchase the Offered Shares pursuant to Section 4(b)(ii), and (B) the expiration of the 15-day period immediately following the date of the Transfer Notice. The failure of Packaging Investors to deliver the Second Election Notice within such fifteen (15) day period shall operate as a waiver of Packaging Investors' rights under this Section 4(b)(iii). (iv) PURCHASE AND Sale. If the Company or Packaging Investors elects to purchase the Offered Shares, it shall be obligated to purchase, and the Selling Stockholder shall be obligated to sell, such Shares. The closing of such purchase and sale shall be held at the principal executive offices of the Company at such time as may be mutually acceptable to the Selling Stockholder and the Company or Packaging Investors, as the case may be (or on the fortieth (40th) day after the date of the Transfer Notice in the event no mutually acceptable date is agreeable to the parties). (v) SALE TO THIRD-PARTY Purchaser. If neither the Company nor Packaging Investors exercises its right to purchase the Offered Shares pursuant to Section 4(b), the Selling Stockholder shall have the right to sell the Offered Shares to the Third-Party Purchaser at a price equal to or greater than the price set forth in the Transfer Notice, provided, that in the event the Selling Stockholder does not sell such Offered Shares at a price equal to or greater than the price set forth in the Transfer Notice within ninety (90) days after the date of the Transfer Notice, then the Offered Shares shall continue to be subject to the terms of this Agreement as if no Transfer Notice had been given. (vi) SUBSEQUENT NOTICES. NEITHER The Company's nor Packaging Investors' failure to exercise any rights under this Section 4(b) shall constitute a waiver of its rights to receive a Transfer Notice with respect to any subsequent proposed transfer to a Third-Party Purchaser. 5 (c) DRAG-ALONG RIGHT. If, at any time prior to the complete distribution by DCBS and CB of their Shares to their respective members, Packaging Investors desires to sell for cash all of its Shares to a Third-Party Purchaser, then Packaging Investors shall have the right to require DCBS and CB to sell all of the Shares then owned by them to such Third-Party Purchaser in connection with such sale. Such right shall be exercisable by written notice (a "Buyout Notice") given to each of DCBS and CB which shall state (i) that Packaging Investors proposes to effect the sale of all of its Shares to such Third-Party Purchaser, (ii) the proposed purchase price per Share to be paid by the Third-Party Purchaser, and (iii) the name of the Third-Party Purchaser. Each of DCBS and CB agrees that, upon receipt of a Buyout Notice, each shall be obligated to sell all of the Shares then owned by them upon the terms and conditions of such transaction (and otherwise take all reasonably necessary action to cause consummation of the proposed transaction, including voting such Shares in favor of such transaction); PROVIDED, HOWEVER, that DCBS and CB shall be obligated to sell Shares as provided in this Section 4(c) only if each such Stockholder receives the same consideration per share as Packaging Investors. (d) TAG-ALONG RIGHT. In the event of a proposed sale or series of related sales (other than pursuant to an effective registration statement under the Act permitted by the Registration Rights Agreement) by Packaging Investors or its Affiliates of Common Stock that represents in the aggregate more than 33.0% of the Shares owned by Packaging Investors on the date hereof (a "Tag-Along Sale") to a Third-Party Purchaser, each of DCBS and CB shall have the right (but not the obligation) (such right, the "Tag-Along Right") to require, as a condition to such sale or sales, Packaging Investors to cause the Third-Party Purchaser to simultaneously purchase the same percentage of Shares then held by such Stockholder as the number of Shares being sold in such sale or sales by Packaging Investors represents to the aggregate number of Shares then held by Packaging Investors (the "Tag-Along Interest") for a per-share amount equal to the per-share amount being paid by the Third-Party Purchaser to Packaging Investors (the "Tag-Along Price"). Prior to completing a Tag-Along Sale, Packaging Investors shall promptly give written notice to DCBS and CB (the "Tag-Along Notice") setting forth the information required in a Transfer Notice. Each of DCBS and CB may exercise its Tag-Along Right by delivering written notice of its election to sell its Shares to Packaging Investors within ten (10) days after receipt of the Tag-Along Notice. Delivery of such notice by DCBS or CB shall 6 constitute the agreement of DCBS or CB, as the case may be, to sell its Tag-Along Interest to the Third-Party Purchaser at the Tag-Along Price and otherwise on the same terms and conditions as apply to the Tag-Along Sale (the "Tag-Along Terms")and the agreement of Packaging Investors to cause the Third-Party Purchaser to purchase DCBS's and CB's Tag-Along Interest at the Tag-Along Price and upon the Tag-Along Terms. 5. CORPORATE GOVERNANCE. (a) ELECTION OF DIRECTORS. (i) NOMINEES. (a) Until the date on which Packaging Investors shall cease to own at least 20.0% of the outstanding Shares, at each annual meeting of stockholders of the Company, the Company will nominate or cause to be nominated one (1) individual designated by Packaging Investors (the "PI Designee") for election to the Board. (b) Until the date on which DCBS and CB shall cease to own at least 5.0% of the outstanding Shares, at each annual meeting of stockholders of the Company, the Company will nominate or cause to be nominated one (1) individual designated by DCBS (the "DCBS Designee") for election to the Board. (ii) ELECTION. The Stockholders agree that until the date (i) on which Packaging Investors shall cease to own at least 20.0% of the outstanding Shares, Packaging Investors, DCBS and CB shall vote any Shares then owned by any of them to nominate and elect the PI Designee as a director of the Company, and (ii) on which DCBS and CB collectively shall cease to own at least 5.0% of the outstanding Shares, Packaging Investors, DCBS and CB shall vote any Shares then owned by any of them to nominate and elect the DCBS Designee as a director of the Company. (iii) REMOVAL. If at any time Packaging Investors or DCBS shall request the right to remove the director or directors nominated by it or to elect or appoint to the Board a nominee or nominees to which it is entitled pursuant to this Section 5, each Stockholder shall vote its Shares at any regular or special meeting and shall take all other actions reasonably necessary to give effect to the provisions of this Section 5. (b) CERTAIN ACTIONS REQUIRING SPECIAL APPROVAL. The Company agrees that, until the date on which Packaging Investors 7 shall cease to own 33.0% of the outstanding Shares, it shall not engage in any of the following transactions or take any of the following actions except with the consent of Packaging Investors: (i) any creation, incurrence, guarantee, refinancing or assumption of indebtedness by the Company or any subsidiary in excess of $15 million; (ii) any direct or indirect acquisition (whether by merger, combination, lease, exchange or otherwise) of any business, assets (other than the procurement of assets in the ordinary course of business), equity securities or other securities of, or other investment in, or loan or advance to, any person or persons, in each case, by the Company or any subsidiary, in any transaction or in any series of related transactions (other than any loans, advances or contributions to any wholly-owned subsidiary) in any aggregate amount exceeding $10 million; (iii) any transfer of assets valued in excess of or in exchange for consideration valued in excess of $10 million by the Company or any subsidiary in any transaction or any series of related transactions (other than transfers in the ordinary course of business and transfers to a wholly-owned subsidiary); (iv) except pursuant to the Company's 2002 Long-Term Incentive Stock Plan, the issuance by the Company or any subsidiary of any equity securities of the Company or any subsidiary (or any of their respective successors or assigns) (other than in the case of any subsidiary, issuances of equity securities to the Company or a wholly-owned subsidiary) in a public offering or otherwise; (v) any transaction of merger, consolidation, amalgamation, recapitalization or other form of business combination, or any liquidation, winding up or dissolution of the Company or any material subsidiary (other than a merger of any wholly-owned subsidiaries with and into each other or the Company); (vi) the Company or any subsidiary engaging in any business other than any of the businesses conducted by the Company or a subsidiary on the date hereof; (vii) any material amendment to the certificate of incorporation or by-laws (or any similar constituent documents, including, without limitation, any partnership agreement or 8 limited liability company agreement) of the Company or any subsidiary; (viii) any dividend or distribution with respect to, or any redemption or repurchase of, any equity securities of the Company; (ix) except as provided in any applicable Annual Budget (as hereinafter defined), any individual or series of related expenditures, commitments, obligations or agreements by the Company or any subsidiary in excess of $5 million; (x) any material transaction or series of related transactions between the Company or any subsidiary, on the one hand, and any party to this Agreement or any Affiliate of such party, on the other hand; (xi) the adoption of any annual budget of the Company prepared for the Company and its subsidiaries for a succeeding fiscal year (an "Annual Budget") which is materially inconsistent with the Annual Budget then in effect, or any material amendment to any such Annual Budget in any fiscal year; or (xii) the entry into any agreement or arrangement to do any of the foregoing. The Company and the Stockholders acknowledge and agree that: (i) Packaging Investors may exercise the foregoing special approval rights in its sole and absolute discretion; (ii) in exercising such rights, Packaging Investors is not a fiduciary to the Company or its stockholders and assumes no fiduciary duties to the Company or its stockholders; (iii) in exercising such rights, Packaging Investors may act solely in its best interest even if same may be contrary to the interests of the Company and its other stockholders and constituents; and (iv) such special approval rights are separate and apart from any approval of the Board (including, without limitation, any designee of Packaging Investors thereon) to accomplish any of the foregoing. (c) FINANCIAL STATEMENTS. The Company shall furnish or cause to be furnished to the holders of Common Stock (i) within 45 days after the close of each of the first three quarters of each fiscal year of the Company and within 90 days after the close of each fiscal year of the Company (a) a consolidated balance sheet of Company as of the end of each such quarter or fiscal year, as the case may be, all in reasonable detail and, in the case of such quarterly financial statements, duly certified (subject to year-end audit adjustments) by the chief financial officer of Company as having been prepared in accordance with GAAP consistently applied, and in the case of annual financial statements, certified by independent public accountants of recognized standing, and (b) consolidated statements of income and cash flow of Company, all in reasonable detail and, in the case of such quarterly financial statements, duly certified 9 (subject to year-end audit adjustments) by the chief financial officer of Company as having been prepared in accordance with GAAP consistently applied and, in the case of annual financial statements, certified by independent public accountants of recognized standing, and (ii) other information as any such Stockholder may reasonably request. 6. SPECIFIC PERFORMANCE. In the event of a breach or threatened breach of the terms, covenant and/or conditions of this Agreement by any of the parties hereto, the other parties shall, in addition to all other remedies, be entitled (without any bond or other security being required) to a temporary and/or permanent injunction without showing any actual damage or that monetary damages would not provide an adequate remedy, and/or a decree for specific performance, in accordance with the provisions hereof. 7. MISCELLANEOUS. (a) GOVERNING LAW. This Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware without regard to principles of conflicts of law. (b) ENTIRE AGREEMENT; AMENDMENTS. This writing constitutes the entire agreement of the parties with respect to the subject matter hereof and may not be modified or amended except by a written agreement signed by the parties hereto. Notwithstanding anything in this Agreement to the contrary, any modification or amendment of this Agreement by a written agreement signed by, or binding upon, the Stockholders shall be valid and binding upon any and all persons or entities who may, at any time, have or claim and rights under or pursuant to this Agreement in respect of the Shares originally acquired by such Stockholder. (c) WAIVER. No waiver of any breach or default hereunder shall be considered valid unless in writing, and no such waiver shall be deemed a waiver of any subsequent breach or default of the same or similar nature. Notwithstanding anything in this Agreement to the contrary, any waiver, consent or other instru- 10 ment under or pursuant to this Agreement signed by, or binding upon, a Stockholder shall be valid and binding upon any and all persons or entities who may, at any time, have or claim any rights under or pursuant to this Agreement in respect of the Shares originally acquired by each Stockholder. (d) ASSIGNMENTS; SUCCESSORS AND ASSIGNS. This Agreement may not be assigned except as otherwise expressly provided herein. (e) SEVERABILITY. If any provision of this Agreement shall be invalid or unenforceable, such invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render invalid or unenforceable any other severable provision of this Agreement, and this Agreement shall be carried out as in any such invalid or unenforceable provision were not contained herein. (f) HEADINGS. The section headings contained herein are for the purposes of convenience only and are not intended to define or limit the contents of said sections. (g) FURTHER ASSURANCES. Each party hereto shall cooperate and shall take such further action and shall execute and deliver such further documents as may be reasonably requested by any other party in order to carry out the provisions and purposes of this Agreement. (h) GENDER. Whenever the pronouns "he" or "his" are used herein they shall also be deemed to mean "she" or "hers" or "it" or "its" whenever applicable. Words in the singular shall be read and construed as though in the plural and words in the plural shall be construed as though in the singular in all cases where they would so apply. (i) COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute but one and the same instrument. (j) NOTICES. All notices or other communications provided for herein shall be in writing and shall be deemed duly given and received (i) on the third (3rd) business day after the date of the mailing thereof by prepaid, registered or certified mail, return receipt requested, (ii) the first (1st) business day after the date of deposit thereof with a reputable overnight courier service, or (iii) when delivered personally as follows: (i) if to the Company, at the address listed below its 11 signature, or at such other place as the Company shall have designated by written notice as herein provided to the Stockholders; and (ii) if to the Stockholders, at the address listed below such Stockholder's signature, or at such other place as the Stockholder shall have designated by written notice as herein provided to the Company. 12 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Stockholders Agreement as of the date first above written. PACKAGING DYNAMICS CORPORATION By: /s/ Phillip D. Harris --------------------------------------- Name: Phillip D. Harris Title: President and CEO PACKAGING DYNAMICS CORPORATION 3900 West 43rd Street Chicago, Illinois 60632 Telephone: (773) 254-8000 Telecopy: (773) 254-8204 Attention: Chief Executive Officer DCBS INVESTORS, L.L.C. By: /s/ Frank V. Tannura --------------------------------------- Name: Frank V. Tannura Title: Managing Member DCBS INVESTORS, L.L.C. c/o Packaging Dynamics Corporation 3900 West 43rd Street Chicago, Illinois 60632 Telephone: (773) 254-8000 Telecopy: (773) 254-8204 Attention: Frank V. Tannura G. Douglas Patterson [Stockholders Agreement] CB INVESTORS, L.L.C. By: DCBS INVESTORS, L.L.C. By: /s/ Frank V. Tannura --------------------------------------- Name: Frank V. Tannura Title: Managing Member CB INVESTORS, L.L.C. c/o Packaging Dynamics Corporation 3900 West 43rd Street Chicago, Illinois 60632 Telephone: (773) 254-8000 Telecopy: (773) 254-8204 Attention: Frank V. Tannura G. Douglas Patterson PACKAGING INVESTORS, L.L.C. By: /s/ Kevin G. Levy --------------------------------------- Name: Kevin G. Levy Title: Vice President of Group III 31, LLC, General Partner PACKAGING INVESTORS, L.P. 201 Main Street, Suite 3100 Fort Worth, Texas 76102 Telephone: (817) 390-8500 Telecopy: (817) 338-2067 Attention: Kevin G. Levy [Stockholders Agreement] EX-99 4 ex2sc13d-packaging.txt EXHIBIT 2 EXHIBIT 2 --------- REGISTRATION RIGHTS AGREEMENT BY AND AMONG PACKAGING INVESTORS, L.P., DCBS INVESTORS, L.L.C., CB INVESTORS, L.L.C., AND PACKAGING DYNAMICS CORPORATION TABLE OF CONTENTS 1. SECURITIES SUBJECT TO THIS AGREEMENT......................................1 1.1 DEFINITIONS.........................................................1 1.2 REGISTRABLE SECURITIES..............................................2 1.3 HOLDERS OF REGISTRABLE SECURITIES...................................2 2. SHELF REGISTRATION........................................................2 2.1 REQUEST FOR SHELF REGISTRATION......................................2 2.2 EFFECTIVE SHELF REGISTRATION AND EXPENSES...........................3 2.3 UNDERWRITING PROCEDURES.............................................3 2.4 SELECTION OF UNDERWRITERS...........................................4 3. DEMAND REGISTRATION.......................................................4 3.1 REQUEST FOR DEMAND REGISTRATION.....................................4 3.2 EFFECTIVE DEMAND REGISTRATION AND EXPENSES..........................4 3.3 UNDERWRITING PROCEDURES.............................................5 3.4 SELECTION OF UNDERWRITERS...........................................5 4. PIGGY-BACK REGISTRATION OF COMMON STOCK...................................5 5. HOLDBACK AGREEMENTS.......................................................6 6. REGISTRATION PROCEDURES...................................................7 7. REGISTRATION EXPENSES....................................................10 8. INDEMNIFICATION; CONTRIBUTION............................................11 8.1 INDEMNIFICATION BY PACKAGING DYNAMICS..............................11 8.2 INDEMNIFICATION BY EACH HOLDER.....................................12 8.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS.............................12 8.4 CONTRIBUTION.......................................................13 9. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS..............................14 10. COVENANT OF HOLDERS OF REGISTRABLE SECURITIES............................14 11. RULE 144.................................................................14 12. MISCELLANEOUS............................................................14 12.1 RECAPITALIZATION, EXCHANGES, ETC., AFFECTING PACKAGING DYNAMICS' CAPITAL STOCK..................................14 12.2 NO INCONSISTENT AGREEMENTS.........................................14 12.3 REMEDIES...........................................................15 12.4 AMENDMENTS AND WAIVERS.............................................15 12.5 NOTICES............................................................15 i 12.6 SUCCESSORS AND ASSIGNS.............................................16 12.7 COUNTERPARTS.......................................................17 12.8 HEADINGS...........................................................17 12.9 GOVERNING LAW......................................................17 12.10 SEVERABILITY.......................................................17 12.11 ENTIRE AGREEMENT...................................................17 ii REGISTRATION RIGHTS AGREEMENT REGISTRATION RIGHTS AGREEMENT, dated July 1, 2002 (this "Agreement"), among Packaging Dynamics Corporation, a Delaware corporation ("Packaging Dynamics"), Packaging Investors, L.P., a Delaware limited partnership ("Packaging Investors"), DCBS Investors, L.L.C., a Delaware limited liability company ("DCBS Investors"), and CB Investors, L.L.C., a Delaware limited liability company ("CB Investors"). Packaging Investors, DCBS Investors and CB Investors are sometimes hereinafter referred to as the "Holders" and each of them, individually, as a Holder. Packaging Dynamics and the Holders are entering into this Agreement with respect to the Registrable Securities (as hereinafter defined) in accordance with paragraph 2 of that certain letter agreement, dated March 18, 2002 (the "Letter Agreement"), among the Holders and Ivex Packaging Corporation, a Delaware corporation ("Ivex") of which Packaging Dynamics was an indirect wholly-owned subsidiary at the time of the execution thereof. The parties herby agree as follows: 1. SECURITIES SUBJECT TO THIS AGREEMENT 1.1 DEFINITIONS 1.1.1 "Common Stock" means Packaging Dynamics' common stock, par value $.01 per share, as constituted on the date hereof, any stock into which such common stock shall have been changed or any stock resulting from any reclassification of such common stock, and all other stock of any class or classes (however designated) of the Company, the holders of which have the right, without limitation as to amount, either to all or to a share of the balance of current dividends and liquidating dividends after the payment of dividends and distributions of any shares entitled to preference, and any shares of capital stock issued or issuable with respect to any of the foregoing as a result of any stock split, stock dividend, reorganization, merger, recapitalization, exchange or similar event or otherwise. 1.1.2 "Registrable Securities" means, subject to Section 1.2, any shares of Common Stock issued to a Holder in the transaction described in paragraph 2 of that certain letter agreement, dated March 18, 2002, among Ivex Packaging Corporation, a Delaware corporation, DCBS Investors, CB Investors and Packaging Investors or acquired by a Holder thereafter and any securities issued or issuable with respect to any Common Stock referred to above by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise. 1.1.3 "Stockholders Agreement" means that certain Stockholders Agreement, dated as of July 1, 2002, among Packaging Dynamics, Packaging Investors, DCBS Investors and CB Investors. 1.2 REGISTRABLE SECURITIES. Only Registrable Securities shall be eligible for registration pursuant to the terms hereof. For purposes of this Agreement, Registrable Securities will cease to be Registrable Securities when (i) a registration statement covering such Registrable Securities has been declared effective under the Securities Act of 1933, as amended (the "Act"), by the Securities and Exchange Commission (the "SEC"), and such Registrable Securities have been disposed of pursuant to such effective registration statement or (ii) the entire amount of Registrable Securities proposed to be sold in a single sale is, or, in the opinion of counsel to Packaging Dynamics, may be distributed to the public pursuant to Rule 144 (or any successor provision then in force) under the Act or otherwise without registration under the Act. 1.3 HOLDERS OF REGISTRABLE SECURITIES. A person is deemed to be a holder of Registrable Securities whenever such person owns of record or beneficially Registrable Securities. If Packaging Dynamics receives conflicting instructions, notices or elections from two or more persons with respect to the same Registrable Securities, Packaging Dynamics shall act upon the basis of the instructions, notice or election received from the registered owner of such Registrable Securities. 2. SHELF REGISTRATION 2.1 REQUEST FOR SHELF REGISTRATION. Packaging Dynamics shall file as soon as reasonably practicable upon the written request of the holder or holders of Registrable Securities constituting one percent (1.0%) or more of the aggregate outstanding shares of Common Stock as of the date hereof, one or more "shelf" registration statements on Form S-3 (or any successor thereto) under the Act with respect to the Registrable Securities pursuant to Rule 415 under the Act and/or any similar rule that may be adopted by the SEC (the "Shelf Registration"). Notwithstanding the immediately preceding sentence or any other provision of this Agreement, Packaging Dynamics shall have no obligation to register Registrable Securities under this Section 2.1 on more than three occasions with respect to any holder of Registrable Securities and shall have no obligation to register, or to commence any registration of, Registrable Securities under this Section 2.1 (a) until after the sixtieth (60th) day following the date of the distribution of Common Stock pursuant to the Distribution Agreement, dated March 18, 2002, between Ivex and Packaging Dynamics (the "Distribution"), (b) if any such registration does not have an aggregate offering price of more than $1 million or (c) at any time when Packaging Dynamics is not eligible to use Form S-3 (or any successor thereto) under the Act to register the Registrable Securities covered by such written request. Each Holder may offer its Registrable Securities under any Shelf Registration pursuant to this Section 2.1. At least fifteen (15) business days prior to the first anticipated filing date of each Shelf Registration, Packaging Dynamics shall notify each holder of Registrable Securities of the information Packaging Dynamics reasonably requires from each such holder if they elect to have any of their Registrable Securities included in the Shelf Registration (the "Requested Information"). Packaging Dynamics shall include the Registrable Securities of any Holder that provides such information in such Shelf Registration. If within five (5) business days prior to the first anticipated filing date, Packaging Dynamics has not received the Requested Information in writing 2 from any of such holders (the "Non-Responsive Holders"), Packaging Dynamics may file the Shelf Registration without including the Registrable Securities of the Non-Responsive Holders. At any time subsequent to the date of the first filing of the Shelf Registration and up to the date that is ten (10) days prior to the first anticipated effective date of such Shelf Registration, a Non-Responsive Holder may notify Packaging Dynamics in writing that it elects to have all or part of its Registrable Securities included in the Shelf Registration and Packaging Dynamics shall so include such Registrable Securities in such Shelf Registration; PROVIDED, HOWEVER, that such Non-Responsive Holders shall have furnished to Packaging Dynamics in writing all Requested Information on or prior to the tenth (10th) day prior to the first anticipated effective date of such Shelf Registration. 2.2 EFFECTIVE SHELF REGISTRATION AND EXPENSES. Packaging Dynamics shall use its best efforts to have the Shelf Registration declared effective as soon as reasonably practicable after such filing and shall use reasonable efforts to keep the Shelf Registration continuously effective for a period of twelve (12) months from the date such Shelf Registration is declared effective. Packaging Dynamics shall have the right, upon written notice to each Holder, to postpone for up to sixty (60) days any registration requested pursuant to this Section 2 if, in the good faith opinion of the board of directors of Packaging Dynamics, such registration would materially interfere with any material acquisition or financing transaction then being pursued by Packaging Dynamics. Packaging Dynamics may not exercise its right to so delay registration under this Section 2 and Section 3 more than once in any twelve-month period. Packaging Dynamics shall supplement or amend, if necessary, each Shelf Registration, as required by the registration form utilized by Packaging Dynamics, by the instructions applicable to such registration form, by the Act or the rules and regulations promulgated thereunder or as reasonably required by the holder or holders of (or any underwriter for) a majority of the aggregate outstanding shares of Registrable Securities to be registered pursuant to such Shelf Registration, and shall furnish to the holders of the Registrable Securities to which the Shelf Registration relates copies of any such supplement or amendment prior to its being used and/or filed with the SEC. Packaging Dynamics shall pay all Registration Expenses (as defined in Section 7 hereof) in connection with each Shelf Registration, whether or not it becomes effective. No Shelf Registration shall include any securities other than Registrable Securities unless the holder or holders of a majority of the aggregate outstanding shares of Registrable Securities to be registered pursuant to such Shelf Registration consent to such inclusion in writing; PROVIDED, HOWEVER, that, subject to compliance by Packaging Dynamics with Section 4 hereof, this Agreement shall not prohibit the filing of shelf registrations other than a Shelf Registration. 2.3 UNDERWRITING PROCEDURES. If the holder or holders of a majority of the aggregate outstanding shares of Registrable Securities to be registered pursuant to a Shelf Registration so elect, the offering of such Registrable Securities pursuant to a Shelf Registration shall be in the form of an underwritten offering and the managing underwriter or underwriters selected for such offering shall be the Approved Underwriter (as defined below). In such event, if the Approved Underwriter advises Packaging Dynamics in writing that in its opinion the aggregate amount of Registrable Securities 3 requested to be included in such offering is sufficiently large as to have a material adverse effect on the success of such offering, Packaging Dynamics shall include in such registration only the aggregate amount of Registrable Securities that, in the opinion of the Approved Underwriter, may be sold without any such material adverse effect, which amount of Common Stock shall be allocated first to the Holders who have requested to be included in such offering pro rata on the basis of the number of Registrable Securities requested to be registered thereby and second to the Company and any other holders of Common Stock. 2.4 SELECTION OF UNDERWRITERS. If any Shelf Registration is in the form of an underwritten offering, the holder or holders of a majority of the aggregate outstanding shares of Registrable Securities to be registered pursuant to such Shelf Registration shall select and obtain the investment banker or investment bankers and manager or managers that will administer the offering (the "Approved Underwriter"); PROVIDED, that the Approved Underwriter shall be reasonably acceptable to Packaging Dynamics. The holders of Registrable Securities to be included in such offering shall pay, pro rata on the basis of the number of Registrable Securities requested to be registered thereby, all discounts and commissions of the Approved Underwriter. 3. DEMAND REGISTRATION 3.1 REQUEST FOR DEMAND REGISTRATION. At any time after the 60th day following the date of the Distribution and when a Shelf Registration with respect to Registrable Securities is not in effect under the Act or a Shelf Registration is not available for use by the holders of the Registrable Securities hereunder, the holder or holders of Registrable Securities constituting one percent (1.0%) or more of the aggregate outstanding shares of Common Stock as of the date hereof may make a written request for registration of Registrable Securities having an aggregate offering price of more than $1 million under the Act and under the securities or blue sky laws of any jurisdiction designated by such holder or holders (each, a "Demand Registration"). Each request for a Demand Registration shall specify the amount of the Registrable Securities proposed to be sold and the intended method of disposition thereof. Upon a request for a Demand Registration, Packaging Dynamics shall promptly take such steps as are necessary or appropriate to prepare for the registration of the Registrable Securities to be registered; PROVIDED that Packaging Dynamics shall have the right, upon written notice to each Holder, to postpone for up to 60 days any registration requested pursuant to this Section 3 if, in the good faith opinion of the board of directors of Packaging Dynamics, such registration would materially interfere with any material acquisition or financial transaction then being pursued by Packaging Dynamics. Packaging Dynamics may not exercise its right to delay registration under Section 2 or Section 3 more than once in any twelve month period. Subject to Section 3.2 hereof, Packaging Dynamics shall have no obligation to register Registrable Securities under this Section 3.1 on more than three occasions with respect to any holder of Registrable Securities. 3.2 EFFECTIVE DEMAND REGISTRATION AND EXPENSES. Packaging Dynamics shall, subject to Section 3.3 hereof, use its best efforts to effect Demand Registrations pursuant to written requests made in accordance with Section 3.1 of this Agreement. If a Demand 4 Registration is not declared effective on or before the expiration of one hundred and twenty (120) days after a request is delivered under Section 3.1, then Packaging Dynamics shall be required to effect one (1) additional Demand Registration for the Registrable Securities included in such Demand Registration pursuant to the terms of this Agreement. A registration shall not count as a Demand Registration until it has become effective and remains continuously effective for not less than one hundred and twenty (120) days. Packaging Dynamics shall use its best efforts to cause any such Demand Registration to become effective not later than ninety (90) days after it receives a request under Section 3.1 hereof. In any registration initiated as a Demand Registration, Packaging Dynamics shall pay all Registration Expenses in connection therewith, whether or not such Demand Registration becomes effective. 3.3 UNDERWRITING PROCEDURES. If the holder or holders of a majority of the aggregate outstanding shares of Registrable Securities to be registered pursuant to a Demand Registration so elect, the offering of such issue of Registrable Securities pursuant to such Demand Registration shall be in the form of an underwritten offering and the managing underwriter or underwriters selected for such offering shall be the Approved Underwriter. In such event, if the Approved Underwriter advises Packaging Dynamics in writing that in its opinion the aggregate amount of Registrable Securities requested to be included in such offering is sufficiently large as to have a material adverse effect on the success of such offering, Packaging Dynamics shall include in such registration only the aggregate amount of Registrable Securities that, in the opinion of the Approved Underwriter, may be sold without any such material adverse effect, which amount of Common Stock shall be allocated first to the Holders who have requested to be included in such offering pro rata on the basis of the number of Registrable Securities requested to be registered thereby and second as to the Company and any other holders of Common Stock. 3.4 SELECTION OF UNDERWRITERS. If any Demand Registration of Registrable Securities is in the form of an underwritten offering, the Approved Underwriter shall be selected and obtained and their discounts and commissions, if any, paid in accordance with the procedure set forth in Section 2.4 hereof. 4. PIGGY-BACK REGISTRATION OF COMMON STOCK. If Packaging Dynamics proposes to file a registration statement under the Act with respect to an offering by Packaging Dynamics for its own account and/or for the accounts of any or all of DCBS Investors, CB Investors or Packaging Investors of Common Stock or other securities of Packaging Dynamics (other than a registration statement on Form S-4 or S-8 or any successor or similar forms thereto), then Packaging Dynamics shall give each Holder at least 20 days' prior written notice of such proposed registration and distribution and offer to each Holder the opportunity to register such amount of Registrable Securities as each holder of Registrable Securities hereunder may request in writing. Subject to Section 9 hereof, Packaging Dynamics shall include, or use its best efforts (within thirty (30) days after the notice provided for in the preceding sentence) to cause the managing underwriter or underwriters of a proposed 5 underwritten offering (the "Company Underwriter") to permit the holders of Registrable Securities to participate in the registration for such offering and to include, such Registrable Securities in such offering. If Packaging Dynamics is offering securities of the same class as any Registrable Securities, any such Registrable Securities of the holders registered pursuant to this Agreement shall be included in the offering on the same terms and conditions as such securities being offered by Packaging Dynamics. Notwithstanding the foregoing, if the Company Underwriter advises Packaging Dynamics in writing that in its opinion the total amount of Registrable Securities, other Common Stock and other securities which the holders of Registrable Securities, Packaging Dynamics and any other persons or entities intend to include in such offering (the "Total Securities") is sufficiently large as to have a material adverse effect on the distribution of the Total Securities, then the Total Securities shall be reduced to the amount recommended by the Company Underwriter, which amount shall be allocated (1) in the case of a Demand Registration by DSBC Investors, CB Investors or any of their Transferees (as such term is defined herein), first to the Holder(s) upon the request of which such Demand Registration was initiated in an amount equal to the greater of (x) 50% of the then outstanding Registrable Securities owned by such Holder(s) making such demand and (y) such Holder's or Holders', as the case may be, pro rata share of the aggregate number of Registrable Securities requested to be registered by all of the Holders and any other holders of Registrable Securities, second to the other Holders, pro rata on the basis of the number of Registrable Securities requested to be registered by such other Holders, and third to any other holders of Registrable Securities and (2) in any other case, first to the Company, second to the Holders, pro rata on the basis of the number of Registrable Securities requested to be registered thereby, and third to any other holders of Registrable Securities. Packaging Dynamics shall bear all Registration Expenses in connection with any registration pursuant to this Section 4 (except for the discounts or commissions of the Company Underwriter applicable to the holders' Registrable Securities, which shall be paid in accordance with the procedures set forth in Section 2.4 hereof). 5. HOLDBACK AGREEMENTS. To the extent not inconsistent with applicable law, the holders of Registrable Securities agree not to effect any public sale or distribution of any Registrable Securities being registered or of securities convertible into or exchangeable or exercisable for such Registrable Securities, including a sale pursuant to Rule 144 under the Act, during the period commencing on the tenth (10th) day prior to the anticipated effective date of, and continuing through and including the one hundred eightieth (180th) day after the actual effective date of, the applicable registration statement under Section 2 or Section 4 of this Agreement (except as part of such registration), in each case, if and to the extent requested by Packaging Dynamics in the case of a nonunderwritten public 6 offering or if and to the extent requested by Packaging Dynamics or the Company Underwriter in the case of an underwritten public offering, PROVIDED that, in the event such request is made to holders of Registrable Securities, Packaging Dynamics shall use reasonable efforts to obtain the agreement of its directors and executive officers not to effect any public sale or distribution of any securities of (or securities convertible into or exchangeable or exercisable for securities of) the same class as the Registrable Securities during such period as holders of Registrable Securities are prohibited from effecting any sale or public distribution pursuant to this Section 5. 6. REGISTRATION PROCEDURES. In connection with any registration effected pursuant to the terms of this Agreement, Packaging Dynamics shall as expeditiously as possible: (a) prepare and file with the SEC, not later than forty-five (45) days after receipt of a request to file a registration statement with respect to Registrable Securities, a registration statement of any form for which Packaging Dynamics then qualifies and which counsel for Packaging Dynamics deems appropriate for the sale of such Registrable Securities in accordance with the intended method of distribution thereof. Packaging Dynamics shall use its best efforts to cause such registration statement to become effective; PROVIDED, HOWEVER, that before filing a registration statement or prospectus or any amendments or supplements thereto, Packaging Dynamics shall (i) provide counsel selected by the holder or holders of a majority of the aggregate outstanding shares of Registrable Securities to be registered pursuant to such registration ("Holders' Counsel") and any other Inspector (as defined below) with an opportunity to participate in the preparation of such registration statement and each prospectus included therein (and each amendment or supplement thereto) to be filed with the SEC, which documents shall be subject to the review of Holders' Counsel, and (ii) notify Holders' Counsel and the holders of Registrable Securities of any stop order issued or threatened by the SEC and take all reasonable action required to prevent the entry of such stop order or to remove it if entered; (b) prepare and file with the SEC such amendments and supplements to such registration statement and the prospectus used in connection therewith as may be necessary to keep such registration statement effective until the earliest to occur of (i) the expiration of twelve (12) months and (ii) the date all Registrable Securities included therein have been sold and comply with the provisions of the Act with respect to the disposition of all securities covered by such registration statement during such period in accordance with the intended methods of disposition by the sellers thereof set forth in such registration statement; (c) furnish to each Holder and to the Holders' Counsel, prior to filing a registration statement, copies of such registration statement as proposed to be filed, and thereafter such number of copies of such registration statement, each amendment and supplement thereto (in each case including all exhibits thereto), the prospectus included in such registration statement (including each preliminary prospectus) and such other 7 documents as the Holders' Counsel may reasonably request in order to facilitate the disposition of the Registrable Securities owned by the holders of Registrable Securities; (d) use its best efforts to register or qualify such Registrable Securities under such other securities or blue sky laws of such jurisdictions as the Holders' Counsel reasonably request and do any and all other acts and things which may be reasonably necessary or advisable to enable the holders of Registrable Securities to consummate the disposition in such jurisdictions of the Registrable Securities held by such holders of Registrable Securities; PROVIDED, HOWEVER, that Packaging Dynamics shall not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph (d), (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction; (e) use its best efforts to cause the Registrable Securities covered by such registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary by virtue of the business and operations of Packaging Dynamics to enable the holders of Registrable Securities to consummate the disposition of such Registrable Securities; (f) notify the holders of Registrable Securities, at any time when a prospectus relating to the registration statement is required to be delivered under the Act, upon discovery of, or upon the happening of any event as a result of which, the prospectus included in such registration statement contains an untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made. In such instance, Packaging Dynamics promptly shall prepare and file a supplement or amendment to such prospectus so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made; (g) enter into and perform customary agreements (including an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities, including using its reasonable efforts to cause officers of Packaging Dynamics to participate in "road shows" and other information meetings organized by the Approved Underwriter or the Company Underwriter; (h) make available for inspection by any managing underwriter participating in any disposition pursuant to such registration statement, Holders' Counsel and any accountant or other agent retained by the holder or holders of a majority of the aggregate outstanding shares of Registrable Securities to be registered hereunder or any managing underwriter (collectively, the "Inspectors"), all pertinent financial and other records, pertinent corporate documents and properties of Packaging Dynamics and its subsidiaries (collectively, the "Records") as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause Packaging Dynamics' and its 8 subsidiaries' officers, directors and employees, and the independent public accountants of Packaging Dynamics, to supply all information reasonably requested by any such Inspector in connection with such registration statement. Records and other information that Packaging Dynamics determines in good faith to be confidential, and of which determination the Inspectors are so notified, shall not be disclosed by the Inspectors unless (i) the disclosure of such Records or other information is necessary to avoid or correct a misstatement or omission in the registration statement, (ii) the release of such Records or other information is ordered pursuant to a subpoena or other order from a court of competent jurisdiction or (iii) the information in such Records or such other information has been made generally available to the public by someone other than such Inspector. Packaging Dynamics shall not be required to disclose any such confidential information or Records until and unless the Inspectors shall have entered into customary confidentiality agreements with Packaging Dynamics with respect thereto. Each holder of Registrable Securities agrees that it shall, upon learning that disclosure of such Records or other information is sought in a court of competent jurisdiction, give notice to Packaging Dynamics and allow Packaging Dynamics, at Packaging Dynamics' expense, to undertake appropriate action to prevent disclosure of the Records or other information deemed confidential; (i) in the event such sale is pursuant to an underwritten offering, use its best efforts to obtain a "cold comfort" letter, dated as of a date reasonably proximate to the date of the underwriting agreement and the date of the closing under the underwriting agreement, from Packaging Dynamics' independent public accountants in customary form and covering such matters of the type customarily covered by "cold comfort" letters as Holders' Counsel or the managing underwriter reasonably request; (j) use its best efforts to obtain, at the request of Holders' Counsel on the date such securities are delivered to the underwriters for sale pursuant to such registration or, if such securities are not being sold through underwriters, on the date the registration statement with respect to such securities becomes effective, an opinion of counsel representing Packaging Dynamics for the purposes of such registration, addressed to the underwriters, if any, and to the holders of Registrable Securities, covering such legal matters with respect to the registration in respect of which such opinion is being given as the Holders' Counsel and the underwriters, if any, may reasonably request and are customarily included in such opinions; (k) otherwise use its best efforts to comply with all applicable rules and regulations of the SEC and make available to its security holders, as soon as reasonably practicable, but no later than fifteen (15) months after the effective date of the registration statement, an unaudited earnings statement covering a period of twelve (12) months beginning within three (3) months after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Act and Rule 158 thereunder; (l) keep each holder of Registrable Securities advised in writing as to the initiation and progress of any registration under Section 2, 3 or 4 hereunder; 9 (m) provide officers' certificates and other customary closing documents; (n) notify each seller of such Registrable Securities and each underwriter participating in the disposition of such Registrable Securities of any stop order or other suspension of effectiveness of the registration statement; (o) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of the registration statement at the earliest possible moment; (p) cooperate with the sellers of such Registrable Securities and the managing underwriter or underwriters, if any, to facilitate the timely preparation and delivery of book-entry securities or, if applicable, of certificates (not bearing any restrictive legends) representing securities, to be sold under the registration statement and enable such securities to be in such denominations or amounts, as the case may be, and registered in such names as the managing underwriter or underwriters, if any, or such sellers may request; (q) cooperate with each seller of Registrable Securities and each underwriter participating in the disposition of such Registrable Securities and their respective counsel in connection with any filings required to be made with the National Association of Securities Dealers, Inc. (the "NASD"); (r) use all reasonable efforts to take all other steps necessary to effect the registration of the Registrable Securities contemplated hereby; and (s) use all reasonable efforts to cause all such Registrable Securities to be listed on each securities exchange on which similar securities issued by Packaging Dynamics are then listed. Packaging Dynamics may require each holder of Registrable Securities to furnish to Packaging Dynamics such information regarding the distribution of such securities as Packaging Dynamics may from time to time reasonably request in writing. Each holder of Registrable Securities agrees that, upon receipt of any notice from Packaging Dynamics of the happening of any event of the kind described in Section 6(f) hereof, such holder of Registrable Securities shall forthwith discontinue disposition of Registrable Securities pursuant to the registration statement covering such Registrable Securities until such holder's receipt of the copies of the supplemented or amended prospectus contemplated by Section 6(f) hereof and, if so directed by Packaging Dynamics, such holder shall deliver to Packaging Dynamics (at Packaging Dynamics' expense) all copies, other than permanent file copies then in such holder's possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice. In the event Packaging Dynamics shall give any such notice, Packaging Dynamics shall extend the period during which such registration statement shall be maintained effective pursuant to this Agreement (including, without limitation, the period referred to in Section 6(b)) by the number of days of the period from and including the date of the giving of such notice pursuant to Section 6(f) hereof to and including the date 10 when the holder of Registrable Securities shall have received the copies of the supplemented or amended prospectus contemplated by and meeting the requirements of Section 6(f). 7. REGISTRATION EXPENSES. Packaging Dynamics shall pay all expenses (other than underwriting discounts and commissions of the Approved Underwriters or of the Company Underwriter applicable to the holders of Registrable Securities) arising from or incident to its performance of, or compliance with, this Agreement, including, without limitation, (i) required SEC, stock exchange and NASD registration and filing fees (including, if applicable, the fees and expenses of any "qualified independent underwriter" as such term is defined in Rule 2720 set forth in the NASD Manual, and of its counsel), (ii) all fees and expenses incurred in complying with securities or blue sky laws (including reasonable fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities), (iii) all printing (including expenses of printing prospectuses if such printing is reasonably requested by the holder or holders of a majority of the Registrable Securities to be registered pursuant to such registration statement), messenger and delivery expenses, (iv) the fees and disbursements of counsel to Packaging Dynamics and of its independent public accountants and any other accounting and legal fees and expenses incurred by Packaging Dynamics (including, without limitation, any expenses arising from any special audits or "cold comfort" letters required by or incident to any registration or qualification), (v) internal expenses (including, without limitation, all salaries and expenses of officers and employees performing legal or accounting duties), (vi) the reasonable fees and expenses of any special experts retained by Packaging Dynamics in connection with any registration pursuant to the terms of this Agreement, regardless of whether such registration statement is declared effective, and (vii) any liability insurance or other premiums for insurance obtained by Packaging Dynamics in connection with any registration, in each case, regardless of whether such registration is declared effective. In connection with each registration hereunder, Packaging Dynamics shall reimburse the holders of Registrable Securities being registered in such registration for the reasonable fees and disbursements of not more than one counsel for the holders of Registrable Securities selected by the holder or holders of a majority of the aggregate outstanding Registrable Securities included, or to be included, in such registration statement. All of the expenses described in this Section 7 are herein called "Registration Expenses." 8. INDEMNIFICATION; CONTRIBUTION 8.1 INDEMNIFICATION BY PACKAGING DYNAMICS. Packaging Dynamics agrees to indemnify, to the full extent permitted by law, each holder of Registrable Securities, its officers, directors, partners, members, employees and agents and each person who controls (within the meaning of the Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act") such holder, and any investment adviser thereof or agent therefor from and against any and all losses, claims, damages, liabilities and expenses (including reasonable costs of investigation and legal expenses) arising out of or based upon any untrue, or alleged untrue, statement of a material fact contained in any 11 registration statement, prospectus or preliminary prospectus or notification or offering circular (as amended or supplemented if Packaging Dynamics shall have furnished any amendments or supplements thereto) or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made. The indemnification agreement contained in this Section 8.1 shall not apply to statements or omissions made in reliance upon and in conformity with information furnished in writing to Packaging Dynamics by such holder of Registrable Securities expressly for use therein. The indemnification agreement contained in this Section 8.1 with respect to any preliminary prospectus shall not inure to the benefit of any person from whom the person asserting any such losses, claims, damages, liabilities or expenses purchased the Registrable Securities that are the subject thereof (or to the benefit of any person controlling such person) if the untrue statement or omission of material fact contained in the preliminary prospectus was corrected in the prospectus, as then amended or supplemented, and such person failed to deliver a copy of the amended or supplemented prospectus to the person asserting such loss, claim, damage, liability or expense after Packaging Dynamics had furnished such person with copies of the same; PROVIDED, HOWEVER, that Packaging Dynamics shall have provided such amended or supplemental prospectus within a reasonable period prior to such sale. Packaging Dynamics shall also indemnify any underwriters of the Registrable Securities, their officers, directors and employees and each person who controls such underwriters (within the meaning of the Act and the Exchange Act) to the same extent as provided above with respect to the indemnification of the holders of Registrable Securities. 8.2 INDEMNIFICATION BY EACH HOLDER. In connection with any registration statement in which a holder of Registrable Securities is participating pursuant to Section 2, 3 or 4 hereof, such holder shall furnish to Packaging Dynamics in writing such information and affidavits with respect to such holder as Packaging Dynamics may reasonably request for use in connection with any such registration statement, preliminary prospectus or prospectus (or amendment or supplement thereof) and each holder of Registrable Securities agrees to indemnify, to the same extent and subject to the same exceptions and limitations as set forth in the foregoing indemnity from the Company to the Holders, Packaging Dynamics, any underwriter retained by Packaging Dynamics and their respective directors, officers, employees and each person who controls Packaging Dynamics or such underwriter (within the meaning of the Act and the Exchange Act), but only with respect to any such information furnished in writing by such holder of Registrable Securities for use therein. In no event shall any Holder have any liability hereunder for an amount in excess of such Holder's net proceeds pursuant to the offering giving rise to such liability. 8.3 CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any person entitled to indemnification hereunder (the "Indemnified Party") agrees to give prompt written notice to the indemnifying party (the "Indemnifying Party") after the receipt by the Indemnified Party of any written notice of the commencement of any action, suit, proceeding or investigation or threat thereof made in writing for which the Indemnified Party intends to claim indemnification or contribution pursuant to this Agreement; PROVIDED, HOWEVER, that the failure so to notify the Indemnifying Party shall relieve the Indemnifying Party of 12 any liability that it may have to the Indemnified Party hereunder only to the extent that it is materially prejudiced by such delay or failure. In case notice of commencement of any such action shall be given to the Indemnifying Party as above provided, the Indemnifying Party shall be entitled to participate in and, to the extent it may wish, jointly with any other Indemnifying Party similarly notified, to assume the defense of such action at its own expense, with counsel chosen by it and reasonably satisfactory to such Indemnified Party. The Indemnified Party shall have the right to employ separate counsel in any such action and participate in the defense thereof, but the fees and expenses of such counsel shall be paid by the Indemnified Party unless (i) the Indemnifying Party agrees to pay the same, (ii) the Indemnifying Party fails to assume the defense of such action with counsel reasonably satisfactory to the Indemnified Party, (iii) the named parties to any such action (including any impleaded parties) have been advised by their counsel that either (x) representation of such Indemnified Party and the Indemnifying Party by the same counsel would be inappropriate under applicable standards of professional conduct or (y) there may be one or more legal defenses available to it which are different from or additional to those available to the Indemnifying Party. In the instances listed in the previous sentence, the Indemnifying Party shall not have the right to assume the defense of such action on behalf of the Indemnified Party, but will not be obligated to pay the fees and expenses of more than one counsel (in addition to any local counsel) for all Indemnified Parties with respect to such claim. The Indemnified Party shall not be required to consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a release from all liability with respect to such claim or litigation. The Indemnifying Party shall not be liable for any settlement entered into without its consent, which consent shall not be unreasonably withheld, conditioned or delayed. 8.4 CONTRIBUTION. If the indemnification provided for in this Section 8 from the Indemnifying Party is unavailable to an Indemnified Party hereunder in respect of any losses, claims, damages, liabilities or expenses referred to herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, claims, damages, liabilities or expenses in such proportion as is appropriate to reflect the relative fault of the Indemnifying Party and Indemnified Party in connection with the actions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of such Indemnifying Party and Indemnified Party shall be determined by reference to, among other things, whether any action in question, including any untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact, has been made by, or relates to information supplied by, such Indemnifying Party or Indemnified Party, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such action. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 8.1, 8.2 and 8.3, any legal or other fees or expenses reasonably incurred by such party in connection with any investigation or proceeding. In no event shall any Holder have any liability hereunder for an amount in excess of such Holder's net proceeds pursuant to the offering giving rise to such liability. 13 The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 8.4 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person. 9. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. A holder of Registrable Securities may not participate in any underwritten registration hereunder unless such holder (a) agrees to sell such holder's Registrable Securities on the basis provided in any underwriting arrangements entered into in accordance with this Agreement and (b) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements, custody agreements and other documents reasonably required under the terms of such underwriting arrangements and (c) agrees to pay their pro rata portion of all underwriting discounts and commissions of Approved Underwriters or the Company Underwriter. 10. COVENANT OF HOLDERS OF REGISTRABLE SECURITIES. Subject to the provisions of this Agreement relating to Registration Expenses, each holder of Registrable Securities by its acceptance of the Registrable Securities agrees to reasonably cooperate with Packaging Dynamics in connection with the preparation and filing of any registration statement hereunder. 11. RULE 144. Packaging Dynamics covenants that it shall file any reports required to be filed by it under the Act, the Exchange Act and the rules and regulations adopted by the SEC thereunder and that it shall take such further action as a holder of Registrable Securities may reasonably request (including providing any information necessary to comply with Rule 144 or Rule 144A under the Act), all to the extent required from time to time to enable such holder to sell Registrable Securities without registration under the Act within the limitation of the exemptions provided by (a) Rule 144 or Rule 144A under the Act, as such rules may be amended from time to time, or (b) any similar rules or regulations hereafter adopted by the SEC. Packaging Dynamics shall, upon the request of a holder of Registrable Securities, deliver to such holder of Registrable Securities a written statement as to filings made by Packaging Dynamics with the SEC. 12. MISCELLANEOUS 12.1 RECAPITALIZATION, EXCHANGES, ETC., AFFECTING PACKAGING DYNAMICS' CAPITAL STOCK. The provisions of this Agreement shall apply, to the full extent set forth herein with respect to any and all common stock of Packaging Dynamics or any successor or assign of Packaging Dynamics (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in exchange for or in substitution of, the Registrable Securities and shall be appropriately adjusted for any stock dividends, splits, reverse splits, combinations, recapitalizations and the like occurring after the date hereof. 14 The Company shall cause any successor or assign (whether by merger consolidation, sale of assets or otherwise) to enter into a new registration rights agreement with the Holders on terms substantially the same as this Agreement as a condition of any such transaction. 12.2 NO INCONSISTENT AGREEMENTS. Packaging Dynamics shall not enter into any agreement with respect to its securities that is inconsistent with the rights granted to the holders of Registrable Securities in this Agreement. 12.3 REMEDIES. The holders of Registrable Securities, in addition to being entitled to exercise all rights granted by law (including recovery of damages), shall be entitled to specific performance of their rights under this Agreement. Packaging Dynamics agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense that a remedy at law would be adequate in any action for specific performance. 12.4 AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless Packaging Dynamics has consented in writing thereto and has obtained (i) the written consent of the holder or holders of at least a majority of the aggregate outstanding shares of Registrable Securities affected by such amendment, modification, supplement, waiver or departure and (ii) if such amendment, modification, supplement, waiver or departure from the provisions hereof would adversely affect the rights of DCBS Investors or its members, the written consent of the holder or holders of at least a majority of all such Registrable Securities owned by DCBS Investors or any of its members. 12.5 NOTICES. All notices or other communications provided for herein shall be in writing and shall be given personally, telegraphed, telexed, sent by facsimile transmission or sent by prepaid air courier or certified, registered or express mail, postage prepaid. Any such notice shall be deemed to have been given (a) when received, if delivered in person, telegraphed, telexed, sent by facsimile transmission and confirmed in writing, (b) two (2) business days thereafter if sent by reputable overnight, prepaid air courier or (c) three (3) business days following the mailing thereof, if mailed by certified first class mail, postage prepaid, return receipt requested, in any such case as follows (or to such other address or addresses as a party may have advised the other in the manner provided in this Section 12.5): (i) if to Packaging Dynamics: Packaging Dynamics Corporation 3900 West 43rd Street Chicago, Illinois 60632 Telephone: (773) 254-6000 Telecopy: (773) 254-8204 Attention: Chief Executive Officer 15 (ii) if to the Holders: Packaging Investors, L.P. c/o Group III 31, L.L.C. 201 Main Street Suite 3100 Fort Worth, Texas 76102 Telephone: (817) 390-8500 Telecopy: (817) 338-2067 Attention: Kevin G. Levy and DCBS Investors, L.L.C. c/o Packaging Dynamics Corporation 3900 West 43rd Street Chicago, Illinois 60632 Telephone: (773) 254-6000 Telecopy: (773) 254-8204 Attention: Frank V. Tannura G. Douglas Patterson and CB Investors, L.L.C. c/o Packaging Dynamics Corporation 3900 West 43rd Street Chicago, Illinois 60632 Telephone: (773) 254-6000 Telecopy: (773) 254-8204 Attention: Frank V. Tannura G. Douglas Patterson and if to any other holder of Registrable Securities, at the address that such holder shall have furnished to Packaging Dynamics in writing, or, until any such other holder so furnishes to Packaging Dynamics an address, then to and at the address of the last holder of such Registrable Securities that has furnished an address to Packaging Dynamics. 12.6 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided herein, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto, including without limitation any person or entity to whom or which any Registrable Securities are transferred or distributed other than in violation of Section 4 of the Stockholders Agreement (a "Transferee"), it being understood and agreed that no such transfer shall be made, and Packaging Investors shall not be required to acknowledge or recognize any such transfer, unless such Transferee has executed and delivered an agreement whereby 16 such Transferee agrees to become a party hereto and to be bound by all the provisions hereof which were applicable to such Transferee's transferor. 12.7 COUNTERPARTS. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. 12.8 HEADINGS. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 12.9 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware applicable to contracts made and to be performed wholly within such State. 12.10 SEVERABILITY. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be in any way impaired thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent permitted by law. Furthermore, in lieu of each such illegal, invalid or unenforceable provision there shall be added automatically as a part of this Agreement a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable. 12.11 ENTIRE AGREEMENT. This Agreement is intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein. This Agreement supersedes all prior agreements, discussions and understandings between the parties with respect to such subject matter. [Signature page follows.] 17 IN WITNESS WHEREOF, the undersigned have executed this Agreement on the date first above written. PACKAGING DYNAMICS CORPORATION By: /s/ Frank V. Tannura ------------------------------- Name: Frank V. Tannura Title: PACKAGING INVESTORS, L.P. By: /s/ Kevin G. Levy ------------------------------- Name: Kevin G. Levy Title: Vice President for Group III 31, L.L.C., General Partner DCBS INVESTORS, L.L.C. By: /s/ Frank V. Tannura ------------------------------- Name: Frank V. Tannura Title: CB INVESTORS, L.L.C. By: /s/ Frank V. Tannura ------------------------------- Name: Frank V. Tannura Title: EX-99 5 ex3sc13d-packaging.txt EXHIBIT 3 EXHIBIT 3 --------- Joint Filing Agreement Pursuant to Rule 13d-1(k)(1)(iii) of Regulation 13D-G of the General Rules and Regulations of the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, the undersigned agrees that the statement to which this Exhibit is attached is filed on behalf of each of them in the capacities set forth below. Dated: July 10, 2002 PACKAGING INVESTORS, L.P. By: GROUP III 31, L.L.C., general partner By: /s/ Kevin G. Levy --------------------------------------- Kevin G. Levy, Vice President GROUP III 31, L.L.C. By: /s/ Kevin G. Levy --------------------------------------- Kevin G. Levy, Vice President /s/ Kevin G. Levy -------------------------------------------- KEVIN G. LEVY As Attorney-in-Fact for J. TAYLOR CRANDALL (1) GROUP HOLDINGS, INC. By: /s/ Kevin G. Levy --------------------------------------- Kevin G. Levy, Vice President CAPITAL PARTNERSHIP, L.P. By: CAPITAL GENPAR, L.L.C, general partner By: GROUP VI 31, L.L.C., sole member By: /s/ Kevin G. Levy --------------------------------------- Kevin G. Levy, Vice President CAPITAL GENPAR, L.L.C, By: GROUP VI 31, L.L.C., sole member By: /s/ Kevin G. Levy --------------------------------------- Kevin G. Levy, Vice President - ------------------------ 1 Power of Attorney authorizing Kevin G. Levy, et al., to act on behalf of J. Taylor Crandall previously has been filed with the Securities and Exchange Commission. 2 GROUP VI 31, L.L.C. By: /s/ Kevin G. Levy --------------------------------------- Kevin G. Levy, Vice President KEYSTONE, INC. By: /s/ Kevin G. Levy --------------------------------------- Kevin G. Levy, Vice President /s/ Kevin G. Levy -------------------------------------------- KEVIN G. LEVY As Attorney-in-Fact for: ROBERT M. BASS (1) - ------------------------ 1 Power of Attorney authorizing Kevin G. Levy, et al., to act on behalf of Robert M. Bass previously has been filed with the Securities and Exchange Commission. EX-99 6 ex4sc13d-packaging.txt EXHIBIT 4 EXHIBIT 4 --------- March 18, 2002 DCBS Investors, L.L.C. CB Investors, L.L.C. c/o IPC, Inc. 100 Tri-State Drive, Suite 200 Lincolnshire, Illinois 60069 Packaging Investors, L.P. c/o Group III 31, L.L.C. 201 Main Street, Suite 3100 Fort Worth, Texas 76017 Ladies and Gentlemen: This letter agreement (this "AGREEMENT") sets forth the principal terms and conditions of the reorganization (the "REORGANIZATION") of the equity ownership structure of Packaging Holdings, L.L.C., a Delaware limited liability company ("PACKAGING HOLDINGS"), to be effected in connection with the acquisition (the "ACQUISITION") of Ivex Packaging Corporation, a Delaware corporation ("IVEX"), by a third party pursuant to an agreement and plan of merger (the "MERGER AGREEMENT"). It is contemplated that the Merger Agreement will require, as a condition to consummation of the Acquisition, that Ivex distribute to its stockholders all of its ownership interest in the business of Packaging Holdings (the "DISTRIBUTION"). Ivex currently holds such ownership interest through the ownership by its indirect wholly-owned subsidiary IPMC, Inc., a Delaware corporation ("IPMC"), of Class B Interests, as defined in the Amended and Restated Limited Liability Company Agreement of Packaging Holdings, made as of July 1999 (the "LLC AGREEMENT"), among Packaging Investors, L.P., a Delaware limited partnership ("PACKAGING INVESTORS"), DCBS Investors, L.L.C., a Delaware limited liability company ("DCBS"), CB Investors, L.L.C., a Delaware limited liability company ("CB"), and IPMC. The terms and conditions of the Distribution will be set forth in a distribution agreement (the "DISTRIBUTION AGREEMENT") to be entered into between Ivex and Newco (as defined below). 1. FORMATION OF HOLDING COMPANY. Prior to the execution of the Merger Agreement by Ivex, IPMC and Ivex shall cause to be formed a new Delaware corporation ("NEWCO") named Packaging Dynamics Corporation, or, if the records maintained by the Delaware Secretary of State indicate that such name is not available, such other name as may be selected by Ivex in its sole discretion. The certificate of incorporation and by-laws of Newco shall contain such provisions as are typically included in the organizational documents of publicly-traded corporations incorporated under Delaware law. The number of authorized shares of Common Stock shall be sufficient to permit the issuance of the number of such shares required by paragraphs 2(a) and 2(b) of this Agreement. 2. REORGANIZATION. Upon satisfaction of the condition set forth in paragraph 6 of this Agreement and immediately prior to the Distribution: a) IPMC shall contribute all of its ownership interest in Packaging Holdings to Newco in exchange for that number of shares of Common Stock of Newco which is equal to one-fifth of (i) the number of shares of Common Stock, $0.01 par value per share, of Ivex ("IVEX COMMON STOCK") then outstanding plus (ii) the number of shares of Ivex Common Stock issuable upon the exercise of Options (as defined in the Merger Agreement) then outstanding (whether or not then exercisable), rounded up to the nearest whole share; and b) each of DCBS, CB and Packaging Investors shall contribute all of its respective ownership interest in Packaging Holdings to Newco in exchange for that number of shares of Common Stock of Newco such that i) the aggregate number of shares of Common Stock of Newco issued to DCBS, CB and Packaging Investors (the "INVESTORS TOTAL") is equal to the number of shares specified in paragraph 2(a) above multiplied by 1.07512; and ii) the number of shares of Common Stock of Newco issued to DCBS shall equal the Investors Total multiplied by 0.15055; and iii) the number of shares of Common Stock of Newco issued to CB shall equal the Investors Total multiplied by 0.03436; and iv) the number of shares of Common Stock of Newco issued to Packaging Investors shall equal the Investors Total multiplied by 0.81509. Concurrently with the Reorganization, (a) Packaging Dynamics Corporation shall enter into a registration rights agreement with DCBS, CB and Packaging Investors providing for customary piggyback and demand registration rights (including the right to demand a shelf registration) with respect to the Common Stock received by such parties in the Reorganization and (b) the LLC Agreement shall be amended and restated to provide for a single-member limited liability company structure. 3. CANCELLATION OF INDEBTEDNESS. Concurrently with the Reorganization, Ivex shall deliver or cause to be delivered to Packaging Holdings for cancellation that certain Nonnegotiable 12.0% Subordinated Note due November 21, 2005, dated 2 November 20, 1998, made by Packaging Holdings payable to IPMC in the original principal amount of $12,500,000. 4. CONSENT TO TRANSACTIONS. Each of Ivex (on behalf of IPMC), DCBS, CB and Packaging Investors consents to the consummation of the Reorganization, the consummation of the Distribution pursuant to the terms and conditions set forth in the Distribution Agreement and the consummation of the other transactions contemplated hereby and thereby and, except with respect to the condition set forth in paragraph 6 of this Agreement, each such party agrees that no other consent or waiver of such party shall be required to consummate the Reorganization and the Distribution. 5. REPRESENTATIONS AND WARRANTIES. a) Each of Ivex, DCBS, CB and Packaging Investors represents and warrants (i) that it or, in the case of Ivex, one of its direct or indirect wholly-owned subsidiaries, is the record and beneficial owner of the membership interests in Packaging Holdings set forth opposite its name in column 1 of Annex A hereto, which membership interests represent the Percentage Interest (as defined in the LLC Agreement) set forth opposite its name in column 2 of such Annex A, and that such membership interests constitute its entire Interest (as defined in the LLC Agreement); (ii) that it or, in the case of Ivex, one of its direct or indirect wholly-owned subsidiaries, owns such membership interests free and clear of all liens, claims, charges, security interests, mortgages or other encumbrances; (iii) that such membership interests are not subject to any rights of first refusal, put rights, other rights to purchase or encumber such membership interests, or to any agreements other than this Agreement as to the encumbrance, disposition or voting with respect to such membership interests, except as provided in the LLC Agreement; and (iv) that it or, in the case of Ivex, one of its direct or indirect wholly-owned subsidiaries, has sole voting power, sole power to issue instructions, sole power of disposition, sole power of conversion and sole power to agree to all of the matters set forth in this Agreement, in each case with respect to all of such membership interests. b) Each of the parties to this Agreement represents and warrants that it is duly organized, validly existing and in good standing as a corporation, limited liability company or limited partnership, as the case may be, under the laws of the jurisdiction of its organization. c) Each of the parties to this Agreement represents and warrants that (i) it has the requisite power and authority to execute and deliver this Agreement, and to consummate the transactions, to the extent it is contemplated to be a party thereto, contemplated by this Agreement; (ii) the execution, delivery and performance by it of this Agreement, and the consummation by it of the transactions contemplated hereby, have been duly and validly authorized by its board of directors (or, if it is not a corporation, by persons performing similar functions); (iii) no other action by it is necessary to authorize the execution and 3 delivery by it of this Agreement and the consummation by it of the transactions contemplated hereby; (iv) this Agreement has been duly and validly executed and delivered by it and, assuming this Agreement constitutes the valid and binding agreement of the other parties hereto, constitutes its valid and binding agreement, enforceable against it in accordance with the terms hereof, except, in the case of this clause (iv), that such enforceability may be limited by (A) bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and (B) general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law). d) Each of the parties hereto represents and warrants that none of the execution and delivery of this Agreement by it nor the consummation by it of the transactions contemplated hereby will (i) conflict with or result in any breach of any provision of its certificate of incorporation or by-laws (or, if it is not a corporation, its governing documents); (ii) require any consent, approval, authorization or permit of, or filing with or notification to, any governmental or regulatory authority, except pursuant to the applicable requirements of the Securities Exchange Act of 1934, as amended, and the Delaware General Corporation Law; (iii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration or lien or other charge or encumbrance) under, any of the terms, conditions or provisions of any material note, license, agreement or other instrument or obligation to which it or any of its subsidiaries is a party or by which any of them or any of their respective assets may be bound, except for those as to which any required consents, approvals or waivers have been obtained; or (iv) violate any material order, writ, injunction, decree, statute, rule or regulation applicable to it or its subsidiaries or any of their respective assets. 6. CONDITION TO THE REORGANIZATION. The obligations of IPMC, DCBS, CB and Packaging Investors to effect the Reorganization are subject to the satisfaction or waiver by the parties to the Merger Agreement of each of the conditions set forth in the Merger Agreement, except for any such condition requiring completion of the Distribution. 7. REASONABLE BEST EFFORTS. The parties to this Agreement will (i) cooperate and work in good faith with one another in the negotiation, preparation and execution of the documentation necessary to effect the formation of Newco, the Reorganization and the cancellation of indebtedness contemplated by paragraph 3 of this Agreement and (ii) use their reasonable best efforts to obtain all necessary approvals, consents, waivers and clearances from governmental authorities and others in furtherance of the Reorganization and the other transactions contemplated hereby. Each party to this Agreement shall not take any action that would make any representation or warranty of such party contained herein untrue or incorrect in any material respect or that would prevent or impair such party's performance of its obligations under this Agreement. None of the parties to this 4 Agreement shall enter into any agreement, arrangement or understanding with the intent or effect of delaying, terminating, preventing or affecting negatively the consummation of the Reorganization, the Distribution, the Merger or the other transactions contemplated by this Agreement. 8. RETENTION OF INTERESTS. Prior to the exchange of ownership interests in Packaging Holdings for shares of capital stock of Newco contemplated by paragraph 2 of this Agreement and except as contemplated by the Merger Agreement, none of Ivex, DCBS, CB or Packaging Investors shall, and Ivex shall cause each of its direct and indirect wholly-owned subsidiaries not to, offer for sale, sell, transfer, tender, pledge, encumber, assign or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to or consent to the offer for sale, transfer, tender, pledge, encumbrance, assignment or other disposition of, any or all of its ownership interest in Packaging Holdings or any interest in such ownership interest. 9. COSTS. Except as otherwise provided herein, each of the parties shall bear its respective costs related to the Reorganization and the other transactions contemplated hereby, including the fees and expenses of their respective lawyers and financial advisors. 10. BINDING AGREEMENT. This Agreement shall be binding and enforceable, constitutes the entire agreement and understanding among the parties hereto with respect to the Reorganization and supersedes all prior negotiations, understandings and agreements between such parties with respect to the Reorganization. 11. CONFIDENTIALITY. Until the public announcement by Ivex of the execution of the Merger Agreement, each of the other parties hereto shall not, without the prior written consent of Ivex, disclose to any person, directly or indirectly, the existence or any of the terms of this Agreement. 12. TERMINATION. This Agreement will automatically terminate and be of no further force and effect upon any termination of the Merger Agreement; PROVIDED that the termination of this Agreement shall not affect any rights any party has with respect to the breach of this Agreement by another party prior to such termination. 13. ASSIGNMENT. This Agreement may not be assigned, by operation of law or otherwise, without the written consent of Ivex. 14. COUNTERPARTS. This Agreement may be executed manually or by facsimile in any number of counterparts, each such counterpart being deemed to be an original instrument, and all such counterparts shall together constitute the same agreement. 15. GOVERNING LAW. This Agreement is governed by the laws of the state of Delaware, without regard to the principles of conflicts of law thereunder. * * * * * * * * 5 Please sign a copy or copies hereof and return the same to the undersigned, whereupon this Agreement (when signed by the respective parties hereto) will become a binding agreement among us. Very truly yours, IVEX PACKAGING CORPORATION By: /s/ G. Douglas Patterson --------------------------------------- Name: G. Douglas Patterson Title: Accepted and agreed to as of the date first above written: DCBS INVESTORS, L.L.C. By: /s/ Frank V. Tannura ----------------------------- Name: Frank V. Tannura Title: CB INVESTORS, L.L.C. By: /s/ Frank V. Tannura ----------------------------- Name: Frank V. Tannura Title: PACKAGING INVESTORS, L.P. By: /s/ J. Taylor Crandall ----------------------------- Name: J. Taylor Crandall Title: [Letter Agreement Signature Page - 2 of 2] ANNEX A COLUMN 1 COLUMN 2 IPMC, Inc. Class B Interests 48.19% DCBS Investors, L.L.C. Class C Interests 7.80% CB Investors, L.L.C. Class C Interests 1.78% Packaging Investors, L.P. Class A Interests 42.23% -----END PRIVACY-ENHANCED MESSAGE-----