EXHIBIT 2
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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;
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(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
ββββ ββββ ββββ ββββββ
βββββββ, ββββββββ βββββ
Telephone: (βββ) βββ-ββββ
Telecopy: (βββ) βββ-ββββ
Attention: Chief Executive Officer
15
(ii) if to the Holders:
Packaging Investors, L.P.
c/o Group III 31, L.L.C.
βββ ββββ ββββββ
βββββ ββββ
ββββ βββββ, βββββ βββββ
Telephone: (βββ) βββ-ββββ
Telecopy: (βββ) βββ-ββββ
Attention: βββββ β. ββββ
and
DCBS Investors, L.L.C.
c/o Packaging Dynamics Corporation
ββββ ββββ ββββ ββββββ
βββββββ, ββββββββ βββββ
Telephone: (βββ) βββ-ββββ
Telecopy: (βββ) βββ-ββββ
Attention: βββββ β. βββββββ
G. βββββββ βββββββββ
and
CB Investors, L.L.C.
c/o Packaging Dynamics Corporation
ββββ ββββ ββββ ββββββ
βββββββ, ββββββββ βββββ
Telephone: (βββ) βββ-ββββ
Telecopy: (βββ) βββ-ββββ
Attention: βββββ β. βββββββ
G. βββββββ βββββββββ
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/ βββββ β. βββββββ
-------------------------------
Name: βββββ β. βββββββ
Title:
PACKAGING INVESTORS, L.P.
By: /s/ βββββ β. ββββ
-------------------------------
Name: βββββ β. ββββ
Title: Vice President for Group III 31,
L.L.C., General Partner
DCBS INVESTORS, L.L.C.
By: /s/ βββββ β. βββββββ
-------------------------------
Name: βββββ β. βββββββ
Title:
CB INVESTORS, L.L.C.
By: /s/ βββββ β. βββββββ
-------------------------------
Name: βββββ β. βββββββ
Title: