EXHIBIT 4
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March 18, 2002
DCBS Investors, L.L.C.
CB Investors, L.L.C.
c/o IPC, Inc.
000 Xxx-Xxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxxx 00000
Packaging Investors, L.P.
c/o Group III 31, L.L.C.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
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
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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
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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
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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.
* * * * * * * *
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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. Xxxxxxx Xxxxxxxxx
---------------------------------------
Name: G. Xxxxxxx Xxxxxxxxx
Title:
Accepted and agreed to
as of the date first above written:
DCBS INVESTORS, L.L.C.
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxxx
Title:
CB INVESTORS, L.L.C.
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxxx
Title:
PACKAGING INVESTORS, L.P.
By: /s/ X. Xxxxxx Xxxxxxxx
-----------------------------
Name: X. Xxxxxx Xxxxxxxx
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%
