Document:

<PAGE>

                                                                    Exhibit 10.5

                               SECOND AMENDMENT TO
                                CREDIT AGREEMENT

     THIS SECOND AMENDMENT TO CREDIT AGREEMENT (this "Amendment") is entered
                                                      ---------
into as of November 12, 1999 among PACKAGING DYNAMICS, L.L.C., a Delaware
limited liability company ("Packaging"), INTERNATIONAL CONVERTER, INC., a
                            ---------
Delaware corporation ("ICI"; together with Packaging, the "Borrower"), the
                       ---                                 --------
Persons identified as "Guarantors" on the signature pages hereto (the
"Guarantors"), the Persons identified as "Lenders" on the signature pages hereto
 ----------
(the "Lenders") and BANK OF AMERICA, N.A., a national banking association,
      -------
formerly known as NationsBank, N.A., as Agent (the "Agent") for the Lenders.
                                                    -----
Capitalized terms used herein and not otherwise defined herein shall have the
respective meanings given to them in the Credit Agreement hereinafter defined or
in this Amendment.

                                    RECITALS
                                    --------

     WHEREAS, the Borrower, the Guarantors, the Agent and the Lenders are
parties to that certain Credit Agreement dated as of November 20, 1998 (as
amended, modified, supplemented, extended or restated from time to time, the
"Credit Agreement");
 ----------------

     WHEREAS, the Borrower has requested that the Lenders agree to amend certain
provisions of the Credit Agreement; and

     WHEREAS, the Agent and the Lenders have agreed to amend certain provisions
of the Credit Agreement as more fully set forth below.

     NOW, THEREFORE, in consideration of the premises 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:

                                     PART 1

                         AMENDMENTS TO CREDIT AGREEMENT

     SUBPART 1.1   Amendments to Section 1.1. Section 1.1 of the Credit
                   ---------------------------
Agreement is hereby amended in the following respects:

          (a)   The definition of "EBITDA" is hereby amended in its entirety to
     read as follows:

                "EBITDA" means, for any period, with respect to the Borrower and
                 ------
          its Subsidiaries on a consolidated basis, the sum of (a) Net Income
          for such period (excluding the effect of any extraordinary or other
          non-recurring gains or losses (including any gain or loss from the
          sale of Property) or non-cash losses (including any non-cash charges
          resulting from the Stock Option Plan)) plus (b)

<PAGE>

          an amount which, in the determination of Net Income for such period,
          has been deducted for (i) Interest Expense for such period, (ii) total
          Federal, state, foreign or other income or franchise taxes and
          Restricted Payments for Taxes for such period and (iii) all
          depreciation and amortization for such period, all as determined in
          accordance with GAAP; provided, however, that (1) EBITDA for each of
                                --------  -------
          the fiscal quarters of the Borrower ended December 31, 1997, March 31,
          1998, June 30, 1998 and September 30, 1998 shall be equal to the sum
          (where applicable) of (A) EBITDA for each such period as set forth on
          Schedule 1.1(d) plus (B) ICI EBITDA for each such period as set forth
          --------------- ----
          on Schedule 1.1(d) plus (C) ICI EBITDA Synergies for each such period
             --------------- ----
          as set forth on Schedule 1.1(d), (2) EBITDA for each of the fiscal
                          ---------------
          quarters of the Borrower ending December 31, 1998 and March 31, 1999
          (A) shall be determined without giving effect to non-cash purchase
          price accounting adjustments of up to $2.5 million relating to the
          Transactions and (B) shall be equal to the sum of (w) the amount
          determined pursuant to the provisions of this definition prior to the
          proviso with respect to the Borrower and its Subsidiaries other than
          ICI plus (x) ICI EBITDA for each such period as set forth on Schedule
              ----                                                     --------
          1.1(d) plus (y) ICI EBITDA Synergies for each such period as set forth
          ------ ----
          on Schedule 1.1(d) plus (z) only with respect to the fiscal quarter of
             --------------- ----
          the Borrower ending December 31, 1998, $900,000, (3) EBITDA for the
          fiscal quarter of the Borrower ending June 30, 1999 (A) shall be
          determined without giving effect to non-cash purchase price accounting
          adjustments relating to the Alupac Acquisition and (B) shall be equal
          to the sum of (x) the amount determined pursuant to the provisions of
          this definition prior to the proviso with respect to the Borrower and
          its Subsidiaries (including ICI) plus (y) ICI EBITDA Synergies for
                                           ----
          such period as set forth on Schedule 1.1(d) and (4) EBITDA for the
                                      ---------------
          fiscal quarter of the Borrower ending September 30, 1999 shall be
          determined without giving effect to non-cash purchase price accounting
          adjustments relating to the Alupac Acquisition.

          (b)   The definition of "Interest Expense" is hereby amended in its
     entirety to read as follows:

                "Interest Expense" means, for any period, with respect to the
                 ----------------
          Borrower and its Subsidiaries on a consolidated basis, all cash
          interest expense (paid or accrued to be paid), including the interest
          component under Capital Leases, as determined in accordance with GAAP;
          provided, however, that (a) Interest Expense for each of the fiscal
          --------  -------
          quarters of the Borrower ended December 31, 1997, March 31, 1998, June
          30, 1998, September 30, 1998 and December 31, 1998 shall be equal to
          the sum (where applicable) of the amount of Interest Expense and ICI
          Interest Expense for each such period as set forth on Schedule 1.1(d)
                                                                ---------------
          and (b) Interest Expense for each of the fiscal quarters of the
          Borrower ended March 31, 1999 and June 30, 1999 shall be equal to the
          sum of (i) with respect to the Borrower and its Subsidiaries (other
          than ICI), the amount determined for each such period pursuant to the
          foregoing terms of this definition plus (ii) with respect
                                             ----

                                       2

<PAGE>

          to ICI, the amount of ICI Interest Expense for each such period as set
          forth on Schedule 1.1(d).
                   ---------------

          (c)   The definition of "Scheduled Funded Debt Payments" is hereby
     amended in its entirety to read as follows:

                "Scheduled Funded Debt Payments" means, as of the end of each
                 ------------------------------
          fiscal quarter of the Borrower, for the Borrower and its Subsidiaries
          on a consolidated basis, the sum of all scheduled payments of
          principal on Funded Debt for the applicable period ending on such date
          (including the principal component of payments due on Capital Leases
          during the applicable period ending on such date); it being understood
          that (a) Scheduled Funded Debt Payments shall not include voluntary
          prepayments or the mandatory prepayments required pursuant to Section
          3.3, (b) Scheduled Funded Debt Payments for each of the fiscal
          quarters of the Borrower ended December 31, 1997, March 31, 1998, June
          30, 1998, September 30, 1998 and December 31, 1998 shall be equal to
          the sum (where applicable) of the amount of Scheduled Funded Debt
          Payments and ICI Scheduled Funded Debt Payments for each such period
          as set forth on Schedule 1.1(d) and (c) Scheduled Funded Debt Payments
                          ---------------
          for each of the fiscal quarters of the Borrower ended March 31, 1999
          and June 30, 1999 shall be equal to the sum of (i) with respect to the
          Borrower and its Subsidiaries (other than ICI), the amount determined
          for each such period pursuant to the foregoing terms of this
          definition plus (ii) with respect to ICI, the amount of ICI Scheduled
                     ----
          Funded Debt Payments for each such period as set forth on Schedule
                                                                    --------
          1.1(d).
          ------

     SUBPART 1.2   Amendment to Schedule 1.1(d). Schedule 1.1(d) to the Credit
                   ----------------------------
Agreement is hereby amended and replaced in its entirety by the corresponding
schedule attached hereto.

                                     PART 2

                           CONDITIONS TO EFFECTIVENESS

     This Amendment shall be and become effective, and shall be deemed effective
as of the date of this Amendment, upon receipt by the Agent of counterparts of
this Amendment, which collectively shall have been duly executed on behalf of
(i) the Credit Parties and (ii) the Required Lenders.

                                       3

<PAGE>

                                     PART 3

                                  MISCELLANEOUS

     SUBPART 3.1   Representations and Warranties. Each of the Credit Parties
                   ------------------------------
hereby represents and warrants to the Agent and the Lenders that, after giving
effect to this Amendment, (a) no Default or Event of Default exists under the
Credit Agreement or any of the other Credit Documents and (b) the
representations and warranties set forth in Section 6 of the Credit Agreement
are, subject to the limitations set forth therein, true and correct in all
material respects as of the date hereof (except for those which expressly relate
to an earlier date).

     SUBPART 3.2   Reaffirmation of Credit Party Obligations. Each Credit Party
                   -----------------------------------------
hereby ratifies the Credit Agreement and acknowledges and reaffirms (a) that it
is bound by all terms of the Credit Agreement applicable to it and (b) that it
is responsible for the observance and full performance of its respective Credit
Party Obligations.

     SUBPART 3.4   Cross-References. References in this Amendment to any Part or
                   ----------------
Subpart are, unless otherwise specified, to such Part or Subpart of this
Amendment.

     SUBPART 3.5   Instrument Pursuant to Credit Agreement. This Amendment is a
                   ---------------------------------------
Credit Document executed pursuant to the Credit Agreement and shall (unless
otherwise expressly indicated therein) be construed, administered and applied in
accordance with the terms and provisions of the Credit Agreement.

     SUBPART 3.6   References in Other Credit Documents. At such time as this
                   ------------------------------------
Amendment shall become effective pursuant to the terms of Part 2, all references
in the Credit Documents to the "Credit Agreement" shall be deemed to refer to
the Credit Agreement as amended by this Amendment.

     SUBPART 3.7   Counterparts/Telecopy. This Amendment may be executed by the
                   ---------------------
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement. Delivery of executed counterparts of the Amendment by telecopy shall
be effective as an original and shall constitute a representation that an
original shall be delivered.

     SUBPART 3.8   Governing Law. THIS AMENDMENT SHALL BE DEEMED TO BE A
                   -------------
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.

     SUBPART 3.9   Successors and Assigns. This Amendment shall be binding upon
                   ----------------------
and inure to the benefit of the parties hereto and their respective successors
and assigns.

     SUBPART 3.10  General. Except as amended hereby, the Credit Agreement and
                   -------
all other Credit Documents shall continue in full force and effect.

                                       4

<PAGE>

     Each of the parties hereto has caused a counterpart of this Amendment to be
duly executed and delivered as of the date first above written.

BORROWERS:                                  PACKAGING DYNAMICS, L.L.C.
---------
                                            By:      /s/ R.R. Cote
                                               ---------------------------------
                                            Name:    R.R. Cote
                                                 -------------------------------
                                            Title:   Vice President
                                                  ------------------------------

                                            INTERNATIONAL CONVERTER, INC.,
                                            as a Borrower and a Guarantor

                                            By:      /s/ R.R. Cote
                                               ---------------------------------
                                            Name:    R.R. Cote
                                                 -------------------------------
                                            Title:   Vice President
                                                  ------------------------------

GUARANTORS:                                 PACKAGING HOLDINGS, L.L.C.
----------

                                            By:      /s/ R.R. Cote
                                               ---------------------------------
                                            Name:    R.R. Cote
                                                 -------------------------------
                                            Title:   Vice President
                                                  ------------------------------

                                            BAGCRAFT PACKAGING, L.L.C.
                                            (f/k/a Bagcraft Acquisition, L.L.C.)

                                            By:      /s/ R.R. Cote
                                               ---------------------------------
                                            Name:    R.R. Cote
                                                 -------------------------------
                                            Title:   Vice President
                                                  ------------------------------

<PAGE>

                                            IPMC ACQUISITION, L.L.C.

                                            By:      /s/ R.R. Cote
                                               ---------------------------------
                                            Name:    R.R. Cote
                                                 -------------------------------
                                            Title:   Vice President
                                                  ------------------------------

<PAGE>

LENDERS:                            BANK OF AMERICA, N.A., a national banking
-------                             association, formerly known as NationsBank,
                                    N.A., in its individual capacity and as
                                    Agent

                                    By:      /s/ Lisa S. Donoghue
                                       -----------------------------------------
                                    Name:    Lisa S. Donoghue
                                         ---------------------------------------
                                    Title:   Managing Director
                                          --------------------------------------

<PAGE>

                                            ABN AMRO BANK N.V.

                                            By:      /s/ Laurie C. Tuzo
                                               ---------------------------------
                                            Name:    Laurie C. Tuzo
                                                 -------------------------------
                                            Title:   Senior Vice President
                                                  ------------------------------

                                            By:      /s/ Eric R. Hollingsworth
                                               ---------------------------------
                                            Name:    Eric R. Hollingsworth
                                                 -------------------------------
                                            Title:   Vice President
                                                  ------------------------------

<PAGE>

                                            FIRST UNION NATIONAL BANK

                                            By:      /s/ Scott Santa Cruz
                                               ---------------------------------
                                            Name:    Scott Santa Cruz
                                                 -------------------------------
                                            Title:   Vice President
                                                  ------------------------------

<PAGE>

                                            FLOATING RATE PORTFOLIO

                                            By: INVESCO Senior Secured
                                                Management, Inc., as attorney in
                                                fact

                                            By:      /s/ Joseph Rotondo
                                               ---------------------------------
                                            Name:    Joseph Rotondo
                                                 -------------------------------
                                            Title:   Authorized Signatory
                                                  ------------------------------

<PAGE>

                                            VAN KAMPEN SENIOR INCOME TRUST

                                            By: Van Kampen Investment Advisory
                                                Corp.

                                            By:      /s/ Darvin D. Pierce
                                               ---------------------------------
                                            Name:    Darvin D. Pierce
                                                 -------------------------------
                                            Title:   Vice President
                                                  ------------------------------

<PAGE>

                                            VAN KAMPEN PRIME RATE INCOME TRUST

                                            By: Van Kampen Investment Advisory
                                                Corp.

                                            By:      /s/ Darvin D. Pierce
                                               ---------------------------------
                                            Name:    Darvin D. Pierce
                                                 -------------------------------
                                            Title:   Vice President
                                                  ------------------------------

<PAGE>

                                            COMERICA BANK

                                            By:      /s/ Harve C. Light
                                               ---------------------------------
                                            Name:    Harve C. Light
                                                 -------------------------------
                                            Title:   Vice President
                                                  ------------------------------<PAGE>

                                                                    Exhibit 10.6

                               THIRD AMENDMENT TO
                           CREDIT AGREEMENT AND WAIVER

         THIS THIRD AMENDMENT TO CREDIT AGREEMENT AND WAIVER (this "Amendment")
                                                                    ---------
is entered into as of August 18, 2000 among PACKAGING DYNAMICS, L.L.C., a
Delaware limited liability company ("Packaging"), INTERNATIONAL CONVERTER, INC.,
                                     ---------
a Delaware corporation ("ICI"; together with Packaging, individually a
                         ---
"Borrower" and collectively the "Borrowers"), the Persons identified as
 --------                        ---------
"Guarantors" on the signature pages hereto (the "Guarantors"), the Persons
                                                 ----------
identified as "Lenders" on the signature pages hereto (the "Lenders") and BANK
                                                            -------
OF AMERICA, N.A., a national banking association, formerly known as NationsBank,
N.A., as Agent (the "Agent") for the Lenders. Capitalized terms used herein and
                     -----
not otherwise defined herein shall have the respective meanings set forth, or
incorporated, by the Credit Agreement (defined below).

                                    RECITALS
                                    --------

         WHEREAS, the Borrowers, the Guarantors, the Agent and the Lenders are
parties to that certain Credit Agreement dated as of November 20, 1998 (as
previously amended and as amended, modified, supplemented, extended or restated
from time to time, the "Credit Agreement");
                        ----------------

         WHEREAS, the Borrowers, as of the fiscal quarter ending June 30, 2000,
violated the Leverage Ratio covenant set forth in Section 7.2(a) of the Credit
Agreement and the Interest Coverage Ratio covenant set forth in Section 7.2(b)
of the Credit Agreement (collectively, the "Acknowledged Defaults");
                                            ---------------------

         WHEREAS, the Lenders and the Agent agreed to forbear exercising any
rights or remedies under the Credit Documents with respect to the Acknowledged
Defaults until August 18, 2000 pursuant to the terms and conditions set forth in
that certain Forbearance Agreement dated as of July 31, 2000 among the
Borrowers, the Guarantors, the Lenders and the Agent; and

         WHEREAS, the Borrowers and the Guarantors have requested that the
Lenders agree to amend certain provisions of the Credit Agreement and waive the
Acknowledged Defaults. The Agent and the Lenders have agreed to do so, as more
fully set forth below, but only upon the terms and conditions set forth herein.

         NOW, THEREFORE, in consideration of the premises 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:

<PAGE>

                                     PART 1

                         AMENDMENTS TO CREDIT AGREEMENT

         The Credit Agreement is hereby amended in accordance with this Part 1.
                                                                        ------

         SUBPART 1.1 Amendments to Section 1.1. Section 1.1 of the Credit
                     -------------------------
Agreement is hereby amended in the following respects:

                  (a)  The definition of "Applicable Percentage" is hereby
         amended in its entirety to read as follows:

                       "Applicable Percentage" means the appropriate applicable
                        ---------------------
                  percentages corresponding to the Leverage Ratio in effect as
                  of the most recent Calculation Date as shown below:

<TABLE>
<CAPTION>
====================================================================================================================================
                                                              Applicable Percentage
                  ------------------------------------------------------------------------------------------------------------------
                              Eurodollar Loans                    Base Rate Loans
                  --------------------------------------------------------------------------
                     Revolving Loans                     Revolving Loans                      Standby     Commercial
Pricing    Leverage   and Tranche A    Tranche B Term     and Tranche A    Tranche B Term    Letter of    Letter of      Commitment
 Level      Ratio       Term Loans         Loans            Term Loans          Loans        Credit Fee   Credit Fee        Fee
------------------------------------------------------------------------------------------------------------------------------------
<S>     <C>           <C>               <C>              <C>               <C>               <C>           <C>           <C>
   I     *2.5 to 1.0      2.25%            3.75%              1.25%             2.75%          2.25%        1.125%         0.50%
------------------------------------------------------------------------------------------------------------------------------------
         *3.0 to 1.0
  II         but          2.50%            3.75%              1.50%             2.75%          2.50%         1.25%         0.50%
        **2.5 to 1.0
------------------------------------------------------------------------------------------------------------------------------------
         *3.5 to 1.0
  III        but          2.75%            3.75%              1.75%             2.75%          2.75%        1.375%         0.50%
        **3.0 to 1.0
------------------------------------------------------------------------------------------------------------------------------------
  IV     *4.0 to 1.0
             but          3.25%            4.00%              2.25%             3.00%          3.25%        1.625%         0.50%
        **3.5 to 1.0
------------------------------------------------------------------------------------------------------------------------------------
   V    **4.0 to 1.0      3.50%            4.25%              2.50%             3.25%          3.50%         1.75%         0.50%
====================================================================================================================================
</TABLE>

*  Less than
** Greater than or equal to

                       The Applicable Percentage for purposes of calculating the
                  applicable interest rate for any day for any Loan, the
                  applicable rate of the Commitment Fee for any day for purposes
                  of Section 3.4(a), the applicable rate of the Standby Letter
                  of Credit Fees for any day for purposes of Section 3.4(b)(i)
                  and the Commercial Letter of Credit Fees for any day for
                  purposes of Section 3.4(b)(ii) shall, in each case, be
                  determined and adjusted quarterly on the date (each a
                  "Calculation Date") five Business Days after the date by which
                   ----------------
                  the Borrower is required to provide the officer's certificate
                  in accordance with the provisions of Section 7.1(d); provided
                                                                       --------
                  that the Applicable Percentages on the Third Amendment
                  ----
                  Effective Date shall be based on Pricing Level V (as shown
                  above) and shall remain at Pricing Level V until the first
                  Calculation Date subsequent to the Third Amendment Effective
                  Date, and, thereafter, the Pricing Level shall be determined
                  by the Leverage Ratio calculated as of the most recent
                  Calculation Date; and provided further that if the Borrower
                                        ---------------------
                  fails to provide the officer's certificate required by Section
                  7.1(d) on or before the

                                       2

<PAGE>

                  Leverage Ratio as of the most recent Calculation Date, the
                  Applicable Percentages for such Calculation Date shall be
                  based on Pricing Level V from such Calculation Date until
                  such time that an appropriate officer's certificate is
                  provided whereupon the Pricing Level shall be determined by
                  the then current Leverage Ratio. Each Applicable Percentage
                  shall be effective from one Calculation Date until the next
                  Calculation Date. Any adjustment in the Applicable
                  Percentages shall be applicable to all existing Loans and
                  Letters of Credit as well as any new Loans made or Letters
                  of Credit issued.

                       The Borrower shall promptly deliver to the Agent, at the
                  address set forth on Schedule 11.1 and at the Agency Services
                                       -------------
                  Address, at the time the officer's certificate is required to
                  be delivered by Section 7.1(d), information regarding any
                  change in the Leverage Ratio that would change the existing
                  Pricing Level pursuant to the preceding paragraph.

                  (b)  The definition of "EBITDA" is hereby amended in its
              entirety to read as follows:

                       "EBITDA" means, for any period, with respect to the
                        ------
                  Borrower and its Subsidiaries on a consolidated basis, the sum
                  of (a) Net Income for such period (excluding the effect of any
                  extraordinary or other non-recurring gains or losses
                  (including any gain or loss from the sale of Property) or
                  non-cash losses (including any non-cash charges resulting from
                  the Stock Option Plan)) plus (b) an amount which, in the
                  determination of Net Income for such period, has been deducted
                  for (i) Interest Expense for such period, (ii) total Federal,
                  state, foreign or other income or franchise taxes and
                  Restricted Payments for Taxes for such period and (iii) all
                  depreciation and amortization for such period, all as
                  determined in accordance with GAAP; provided, however, that
                                                      --------  -------
                  (1) EBITDA for the fiscal quarter of the Borrower ending
                  September 30, 1999 shall be determined without giving effect
                  to non-cash purchase price accounting adjustments relating to
                  the Alupac Acquisition, (2) EBITDA for the fiscal quarter of
                  the Borrower ending December 31, 1999 shall be determined
                  without giving effect to a charge of up to $750,000 relating
                  to the Ameriserv accounts receivable, and (3) EBITDA for the
                  fiscal quarter of the Borrower ending June 30, 2000 shall be
                  determined without giving effect to (A) a charge of up to
                  $3,450,000 relating to the Ameriserve accounts receivable and
                  (B) restructuring charges of up to $1,250,000; provided
                                                                 --------
                  further, however, any gain resulting from any recovery of
                  -------  -------
                  amounts with respect to the Ameriserv accounts receivable
                  shall not be included in the calculation of EBITDA

                  (c)  Clause (iv) of the definition of "Permitted Acquisition"
              is hereby amended in its entirety to read as follows:

                       (iv) the Borrower shall have delivered to the Agent a Pro
                  Forma Compliance Certificate demonstrating that, upon giving
                  effect to such Acquisition on a Pro Forma Basis, (a) the
                  Credit Parties shall be in compliance with all of

                                       3

<PAGE>

                  the covenants set forth in Section 7.2 and (b) the Leverage
                  Ratio shall be equal to or less than 3.25 to 1.0.

                  (d)   The definition of "Revolving Committed Amount" is hereby
             amended in its entirety to read as follows:

                        "Revolving Committed Amount" means (a) until the
                         --------------------------
                  Leverage Ratio as of the last day of any fiscal quarter after
                  the Third Amendment Effective Date is equal to or less than
                  3.25 to 1.0, TWENTY-FIVE MILLION DOLLARS ($25,000,000) or such
                  lesser amount as the Revolving Committed Amount may be reduced
                  pursuant to Section 2.1(d) or 3.3(c), and (b) thereafter,
                  FORTY-FIVE MILLION DOLLARS ($45,000,000) or such lesser amount
                  as the Revolving Committed Amount may be reduced pursuant to
                  Section 2.1(d) or 3.3(c).

                  (e)   The definition of "Third Amendment Effective Date" is
             hereby added to read as follows:

                        "Third Amendment Effective Date" means August 18, 2000.
                          -----------------------------

             SUBPART 1.2 Amendments to Section 7.2. Sections 7.2(a), (b) and (d)
                         -------------------------
of the Credit Agreement are hereby amended in their entirety to read as follows:

                  7.2   Financial Covenants.
                        -------------------

                        (a) Leverage Ratio. The Credit Parties shall cause the
                            --------------
                  Leverage Ratio, measured as of the last day of each fiscal
                  quarter, to be less than or equal to the ratio shown below for
                  the period corresponding thereto:

<TABLE>
<CAPTION>
                 ---------------------------------------------------------------------------

                 Period                                                       Ratio
                 ------                                                       -----

                 ---------------------------------------------------------------------------
                 <S>                                                       <C>
                 June 30, 2000 through December 31, 2000                   4.25 to 1.00
                 ---------------------------------------------------------------------------
                 January 1, 2001 through March 31, 2001                    4.00 to 1.00
                 ---------------------------------------------------------------------------
                 April 1, 2001 through June 30, 2001                       3.75 to 1.00
                 ---------------------------------------------------------------------------
                 July 1, 2001 through September 30, 2001                   3.50 to 1.00
                 ---------------------------------------------------------------------------
                 October 1, 2001 through December 31, 2001                 3.25 to 1.00
                 ---------------------------------------------------------------------------
                 January 1, 2002 through March 31, 2002                    3.00 to 1.00
                 ---------------------------------------------------------------------------
                 April 1, 2002 through March 31, 2003                      2.75 to 1.00
                 ---------------------------------------------------------------------------
                 April 1, 2003 through March 31, 2004                      2.50 to 1.00
                 ---------------------------------------------------------------------------
                 April 1, 2004 and thereafter                              2.00 to 1.00
                 ---------------------------------------------------------------------------
</TABLE>

                        (b) Interest Coverage Ratio. The Credit Parties shall
                            -----------------------
                  cause the Interest Coverage Ratio, measured as of the last day
                  of each fiscal quarter, to be greater than or equal to the
                  ratio shown below for the period corresponding thereto:

                                       4

<PAGE>

<TABLE>
<CAPTION>
                 ------------------------------------------------------------------------------------

                 Period                                                    Ratio
                 ------                                                    -----

                 ------------------------------------------------------------------------------------
                 <S>                                                    <C>
                 June 30, 2000 through March 31, 2001                   2.25 to 1.00
                 ------------------------------------------------------------------------------------
                 April 1, 2001 through June 30, 2001                    2.50 to 1.00
                 ------------------------------------------------------------------------------------
                 July 1, 2001 through June 30, 2002                     2.75 to 1.00
                 ------------------------------------------------------------------------------------
                 July 1, 2002 through December 31, 2002                 3.00 to 1.00
                 ------------------------------------------------------------------------------------
                 January 1, 2003 through June 30, 2003                  3.25 to 1.00
                 ------------------------------------------------------------------------------------
                 July 1, 2003 through December 31, 2003                 3.50 to 1.00
                 ------------------------------------------------------------------------------------
                 January 1, 2004 through June 30, 2004                  3.75 to 1.00
                 ------------------------------------------------------------------------------------
                 July 1, 2004 and thereafter                            4.00 to 1.00
                 ------------------------------------------------------------------------------------
</TABLE>

                                   **********

                        (d)   Fixed Charge Coverage Ratio. The Credit Parties
                              ---------------------------
                  shall cause the Fixed Charge Coverage Ratio, for the twelve
                  month period ending on the last day of each fiscal quarter of
                  the Borrower, to be greater than or equal to the ratio shown
                  below for the period corresponding thereto:

<TABLE>
<CAPTION>
                 ------------------------------------------------------------------------------------

                 Period                                                     Ratio
                 ------                                                     -----

                 ------------------------------------------------------------------------------------
                 <S>                                                     <C>
                 June 30, 2000 through June 30, 2001                     1.20 to 1.00
                 ------------------------------------------------------------------------------------
                 July 1, 2001 through December 31, 2001                  1.15 to 1.00
                 ------------------------------------------------------------------------------------
                 January 1, 2002 through March 31, 2002                  1.20 to 1.00
                 ------------------------------------------------------------------------------------
                 April 1, 2002 through September 30, 2002                1.25 to 1.00
                 ------------------------------------------------------------------------------------
                 October 1, 2002 and thereafter                          1.30 to 1.00
                 ------------------------------------------------------------------------------------
</TABLE>

         SUBPART 1.3  Deletion of Schedule 1.1(d). Schedule 1.1(d) to the Credit
                      --------------------------   --------------
Agreement is hereby deleted in its entirety.

                                     PART 2

                    WAIVER OF ACKNOWLEDGED EVENTS OF DEFAULT

         SUBPART 2.1  Waiver. The Lenders and the Agent hereby agree to waive
                      ------
their rights, to the extent and only to the extent such rights arise exclusively
as a result of the Acknowledged Defaults, to stop making Revolving Loans and
issuing Letters of Credit, to accelerate the full outstanding balance of the
Credit Party Obligations and to exercise such other remedies as may be afforded
the Lenders and the Agent under the Credit Documents or by applicable law;
provided, however, that the Lenders and Agent shall be free to exercise any or
--------  -------
all of their rights and remedies at any time after the occurrence of an Event of
Default (other than the Acknowledged Defaults) under the Credit Agreement or any
other Credit Document (including a

                                       5

<PAGE>

breach of any term of this Amendment). Nothing set forth herein or contemplated
hereby is intended to constitute an agreement by the Lenders or the Agent to
waive the exercise of any rights and remedies available to the Lenders or the
Agent under the Credit Agreement and the other Credit Documents (all of which
rights and remedies are hereby expressly reserved by the Lenders and the Agent)
upon and after the occurrence of an Event of Default other than the Acknowledged
Defaults.

                                     PART 3

                      CONDITIONS PRECEDENT TO EFFECTIVENESS

     SUBPART 3.1   Conditions Precedent. This Amendment shall become effective
                   --------------------
as of the date hereof upon the satisfaction (or waiver in writing by each of the
Lenders) of each of the following conditions precedent:

          (a)   Executed Amendment. Receipt by the Agent of counterparts of this
                ------------------
     Amendment, which collectively shall have been duly executed on behalf of
     (i) the Borrowers, (ii) the Guarantors and (iii) the Required Lenders.

          (b)   Resolutions. Receipt by the Agent of copies of resolutions of
                -----------
     the Board of Directors or their equivalent for the Credit Parties, each
     approving and adopting this Amendment, the transactions contemplated herein
     and authorizing execution and delivery hereof, certified by a secretary or
     assistant secretary of such party to be true and correct.

          (c)   Opinion of Counsel. The Agent shall have received a legal
                ------------------
     opinion of Skadden Arps Slate Meagher & Flom in form and substance
     reasonably satisfactory to the Agent.

          (d)   Fees. The Agent shall have received (i) on behalf of each Lender
                ----
     that approves this Amendment by delivery to the Agent of an executed
     signature page on or before 12:00 noon, Monday, August 21, 2000, a fee
     equal to 0.25% of the Commitments of such Lender (before giving effect to
     this Amendment) and (ii) such fees due and payable pursuant to that certain
     fee letter agreement dated as of August 18, 2000 among the Borrowers and
     Bank of America, N.A.

                                     PART 4

                                  MISCELLANEOUS

     SUBPART 4.1   Representations and Warranties. Each of the Credit Parties
                   ------------------------------
hereby represents and warrants to the Agent and the Lenders that, after giving
effect to this Amendment, (a) no Default or Event of Default exists under the
Credit Agreement or any of the other Credit Documents and (b) the
representations and warranties set forth in Section 6 of the Credit

                                       6

<PAGE>

Agreement are, subject to the limitations set forth therein, true and correct in
all material respects as of the date hereof (except for those which expressly
relate to an earlier date).

     SUBPART 4.2   Reaffirmation of Credit Party Obligations. Each Credit Party
                   -----------------------------------------
hereby ratifies the Credit Agreement and acknowledges and reaffirms (a) that it
is bound by all terms of the Credit Agreement applicable to it and (b) that it
is responsible for the observance and full performance of its respective Credit
Party Obligations.

     SUBPART 4.3   Cross-References. References in this Amendment to any Part or
                   ----------------
Subpart are, unless otherwise specified, to such Part or Subpart of this
Amendment.

     SUBPART 4.4   Instrument Pursuant to Credit Agreement. This Amendment is a
                   ---------------------------------------
Credit Document executed pursuant to the Credit Agreement and shall (unless
otherwise expressly indicated therein) be construed, administered and applied in
accordance with the terms and provisions of the Credit Agreement.

     SUBPART 4.5   References in Other Credit Documents. At such time as this
                   ------------------------------------
Amendment shall become effective pursuant to the terms of Part 3, all references
in the Credit Documents to the "Credit Agreement" shall be deemed to refer to
the Credit Agreement as amended by this Amendment.

     SUBPART 4.6   Counterparts/Telecopy. This Amendment may be executed by the
                   ---------------------
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement. Delivery of executed counterparts of the Amendment by telecopy shall
be effective as an original and shall constitute a representation that an
original shall be delivered.

     SUBPART 4.7   Governing Law. THIS AMENDMENT SHALL BE DEEMED TO BE A
                   -------------
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK.

     SUBPART 4.8   Successors and Assigns. This Amendment shall be binding upon
                   ----------------------
and inure to the benefit of the parties hereto and their respective successors
and assigns.

     SUBPART 4.9   General. Except as amended hereby, the Credit Agreement and
                   -------
all other Credit Documents shall continue in full force and effect.

         [The remainder of this page has been left blank intentionally.]

                                       7

<PAGE>

     Each of the parties hereto has caused a counterpart of this Amendment to be
duly executed and delivered as of the date first above written.

BORROWERS:                         PACKAGING DYNAMICS, L.L.C.
---------

                                   By:      /s/ R.R. Cote
                                      ------------------------------------------
                                   Name:
                                        ----------------------------------------
                                   Title:
                                         ---------------------------------------

                                   INTERNATIONAL CONVERTER, INC.,
                                   as a Borrower and a Guarantor

                                   By:      /s/ R.R. Cote
                                      ------------------------------------------
                                   Name:
                                        ----------------------------------------
                                   Title:
                                         ---------------------------------------

GUARANTORS:                        PACKAGING HOLDINGS, L.L.C.
----------

                                   By:      /s/ R.R. Cote
                                      ------------------------------------------
                                   Name:
                                        ----------------------------------------
                                   Title:
                                         ---------------------------------------

                                   BAGCRAFT PACKAGING, L.L.C.

                                   (f/k/a Bagcraft Acquisition, L.L.C.)

                                   By:      /s/ R.R. Cote
                                      ------------------------------------------
                                   Name:
                                        ----------------------------------------
                                   Title:
                                         ---------------------------------------

                                   IPMC ACQUISITION, L.L.C.

                                   By:      /s/ R.R. Cote
                                      ------------------------------------------
                                   Name:
                                        ----------------------------------------
                                   Title:
                                         ---------------------------------------

                                            Signature Page to Packaging Dynamics
                                                      Third Amendment and Waiver

<PAGE>

LENDERS:                       BANK OF AMERICA, N.A., a national banking
-------                        association, formerly known as NationsBank, N.A.,
                               in its individual capacity and as Agent

                               By:      /s/ Lynn W. Stetson
                                  -----------------------------------------
                               Name:    Lynn W. Stetson
                                    ---------------------------------------
                               Title:   Managing Director
                                     --------------------------------------

                                            Signature Page to Packaging Dynamics
                                                      Third Amendment and Waiver

<PAGE>

                                            ALLSTATE LIFE INSURANCE COMPANY

                                            By:      /s/ Jeffrey A. Mazer
                                               ---------------------------------
                                            Name:    Jeffrey A. Mazer
                                                 -------------------------------
                                            Title:   Authorized Signatory
                                                  ------------------------------

                                            By:      /s/ David Walsh
                                               ---------------------------------
                                            Name:    David Walsh
                                                 -------------------------------
                                            Title:   Authorized Signatory
                                                  ------------------------------

                                            Signature Page to Packaging Dynamics
                                                      Third Amendment and Waiver

<PAGE>

                               ABN AMRO BANK N.V.

                               By:    /s/ Elizabeth H. Hurst
                                  ---------------------------------------
                               Name:  Elizabeth H. Hurst
                                    -------------------------------------
                               Title: Group Vice President
                                     ------------------------------------

                               By:    /s/ C. David Allman
                                  ---------------------------------------
                               Name:  C. David Allman
                                    -------------------------------------
                               Title: Assistant Vice President
                                     ------------------------------------

                                            Signature Page to Packaging Dynamics
                                                      Third Amendment and Waiver

<PAGE>

                            FIRST UNION NATIONAL BANK

                            By:    /s/ J. Andrew Phelps
                               ---------------------------------------
                            Name:  J. Andrew Phelps
                                 -------------------------------------
                            Title: Vice President
                                  ------------------------------------

                                            Signature Page to Packaging Dynamics
                                                      Third Amendment and Waiver

<PAGE>

                                SOCIETE GENERALE

                                By:    /s/ Jerry Parisi
                                   ----------------------------------------
                                Name:  Jerry Parisi
                                     --------------------------------------
                                Title: Managing Director
                                      -------------------------------------

                                            Signature Page to Packaging Dynamics
                                                      Third Amendment and Waiver

<PAGE>

                             FLOATING RATE PORTFOLIO

                             By: INVESCO Senior Secured Management, Inc.,
                                 as attorney in fact

                             By:    /s/ Joseph Rotondo
                                ---------------------------------------
                             Name:  Joseph Rotondo
                                  -------------------------------------
                             Title: Authorized Signatory
                                   ------------------------------------

                                            Signature Page to Packaging Dynamics
                                                      Third Amendment and Waiver

<PAGE>

                                  THE CIT GROUP/EQUIPMENT FINANCING, INC.

                                  By:    /s/ Nicki Reid
                                     --------------------------------------
                                  Name:____________________________________

                                  Title:___________________________________

                                            Signature Page to Packaging Dynamics
                                                      Third Amendment and Waiver

<PAGE>

                                  COMERICA BANK

                                  By:    /s/ Kathleen M. Kasperek
                                     ------------------------------------
                                  Name:  Kathleen M. Kasperek
                                       ----------------------------------
                                  Title: Assistant Vice President
                                        ---------------------------------

                                            Signature Page to Packaging Dynamics
                                                      Third Amendment and Waiver

<PAGE>

                                  SENIOR DEBT PORTFOLIO

                                  By:    Boston Management and Research,
                                         as Investment Advisor

                                  By:    /s/ Payson F. Swaffield
                                     ------------------------------------
                                  Name:  Payson F. Swaffield
                                       ----------------------------------
                                  Title: Vice President
                                        ---------------------------------

                                            Signature Page to Packaging Dynamics
                                                      Third Amendment and Waiver

<PAGE>

                                    TYLER TRADING, INC.

                                    By:    /s/ Johnny E. Graves
                                       ----------------------------------
                                    Name:  Johnny E. Graves
                                         --------------------------------
                                    Title: President
                                          -------------------------------

                                            Signature Page to Packaging Dynamics
                                                      Third Amendment and Waiver

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