Exhibit 2.3
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 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 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 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.
* * * * * * * *
Very truly yours,
IVEX PACKAGING CORPORATION
By: /s/ X.X. Xxxxxxxxx
-------------------------
Name: X.X. Xxxxxxxxx
Title: Vice President and
General Counsel
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: Authorized Signatory
CB INVESTORS, L.L.C.
By: /s/ Xxxxx X. Xxxxxxx
--------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Authorized Signatory
PACKAGING INVESTORS, L.P.
By: /s/ X. Xxxxxx Xxxxxxxx
--------------------------------
Name: X. Xxxxxx Xxxxxxxx
Title: Authorized Signatory
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%
