Exhibit 3
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).
"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 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
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 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.
(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 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 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 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 (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 instrument 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
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.
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/ Xxxxxxx X. Xxxxxx
------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: President and CEO
PACKAGING DYNAMICS CORPORATION
0000 Xxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Chief Executive Officer
DCBS INVESTORS, L.L.C.
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxxx
Title: Managing Member
DCBS INVESTORS, L.L.C.
c/o Packaging Dynamics Corporation
0000 Xxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx
G. Xxxxxxx Xxxxxxxxx
CB INVESTORS, L.L.C.
By: DCBS INVESTORS, L.L.C.
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------
Name: Xxxxx X. Xxxxxxx
Title: Managing Member
CB INVESTORS, L.L.C.
c/o Packaging Dynamics Corporation
0000 Xxxx 00xx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxxx
G. Xxxxxxx Xxxxxxxxx
PACKAGING INVESTORS, L.L.C.
By: /s/ Xxxxx X. Xxxx
------------------------------
Name: Xxxxx X. Xxxx
Title: Vice President of Group III 31, LLC,
General Partner
PACKAGING INVESTORS, L.P.
000 Xxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxxx, Xxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxx
