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SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN CONSENT STATEMENT
SCHEDULE 14A INFORMATION
Consent Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [_]
Filed by a Party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Consent Statement [_] Confidential, For Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[_] Definitive Consent Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
SHOREWOOD PACKAGING CORPORATION
(Name of Registrant as Specified in its Charter)
CHESAPEAKE CORPORATION
SHEFFIELD, INC.
(Name of Person(s) Filing Consent Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act
Rules 14a-6(i)1 and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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PRELIMINARY COPY--SUBJECT TO COMPLETION
CONSENT STATEMENT
TO
STOCKHOLDERS OF SHOREWOOD PACKAGING CORPORATION
BY
SHEFFIELD, INC.
A WHOLLY OWNED SUBSIDIARY OF
CHESAPEAKE CORPORATION
This Consent Statement is being furnished by Sheffield, Inc. ("Purchaser"),
a Delaware corporation and a wholly owned subsidiary of Chesapeake
Corporation, a Virginia corporation ("Chesapeake"), to the holders (the
"Stockholders") of shares of common stock, par value $0.01 per share (the
"Common Stock"), of Shorewood Packaging Corporation, a Delaware corporation
("Shorewood" or the "Company"), in connection with the solicitation by
Purchaser of the consent of Stockholders to authorize the actions described
below (the "Consent Solicitation"). This Consent Statement and the
accompanying WHITE consent card are first being sent to Stockholders on or
about December , 1999.
THIS CONSENT SOLICITATION IS BEING MADE BY PURCHASER AND NOT ON BEHALF OF
THE BOARD OF DIRECTORS OF SHOREWOOD.
Your consent is important, no matter how many or how few shares of Common
Stock you own. Purchaser urges you to sign, date and return the enclosed WHITE
consent card.
Chesapeake and Purchaser urge you to read this entire Consent Statement
carefully. The information contained in this Consent Statement includes
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Such statements are
indicated by words or phrases such as "anticipates," "estimates," "projects,"
"believes," "intends," "expects" and similar words and phrases. Forward-
looking statements are subject to risks, uncertainties and other factors which
could cause actual results to differ materially from future results expressed
or implied by such forward-looking statements. Such factors include, among
others, the following: (i) consummation of the proposed acquisition; (ii) the
successful integration of the Company into Chesapeake's operations after
consummation of the proposed acquisition; (iii) the retention of key employees
within the sales, service, design and manufacturing organizations of the
Company; and (iv) Chesapeake's ability to operate successfully within a more
leveraged capital structure. Given these uncertainties, prospective investors
are cautioned not to place undue reliance on such forward-looking statements.
Chesapeake and Purchaser disclaim any obligation to update any such factors or
to publicly announce the results of any revisions to any of the forward-
looking statements contained herein to reflect future events or developments.
Purchaser requests that completed, signed and dated WHITE consent cards be
returned to it on or before its publicly announced target date of December ,
1999. A FAILURE TO SIGN, DATE AND RETURN THE WHITE CONSENT CARD IN A TIMELY
MANNER WILL HAVE THE SAME EFFECT AS A VOTE AGAINST PURCHASER'S PROPOSALS. If
you need assistance in voting your shares of Common Stock, please call
Purchaser's information agent, D.F. King & Co., Inc., toll free at 1-800-578-
5378.
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THE CONSENT SOLICITATION
Purchaser is soliciting consents to take the following actions
(collectively, the "Proposals") without a Stockholders' meeting, as permitted
by Delaware law and as further described herein:
Proposal No. 1. Amend Article III, Section 1 of the Amended and Restated
By-Laws of the Company (the "Amended Bylaws") to remove the provision
establishing a staggered board of directors by deleting the second, third
and fourth sentences of Article III, Section 1 and inserting in lieu
thereof the sentence "Directors shall be elected annually to serve for one
year terms" and amend Article III, Section 2 of the Amended Bylaws by
deleting in the third sentence the phrase "at which directors of this class
are to be elected";
Proposal No. 2. Remove each of the nine current members of the Board of
Directors of Shorewood (the "Company Board") and any other person or
persons who may be members of the Company Board at the time the Proposals
become effective (other than the persons elected as a result of the
adoption of Proposal No. 4 set forth below);
Proposal No. 3. Amend Article III, Section 1 of the Amended Bylaws to fix
the number of directors of Shorewood at three, by deleting the phrase "to
consist of not less than three nor more than twelve directors, as shall be
determined by resolution of the Board of Directors from time to time" and
inserting in lieu thereof the phrase "to consist of three (3) directors";
Proposal No. 4. Elect each of , and [individuals, not
currently affiliated with Chesapeake or Purchaser to be named prior to
distribution of consent solicitation materials] (together, the "Nominees")
as a member of the Company Board; and
Proposal No. 5. Repeal each amendment of the Amended Bylaws (whether
effected by supplement to, deletion from or revision of the Amended Bylaws)
adopted subsequent to November 22, 1999, and at or prior to the time the
Proposals become effective (other than the amendments adopted as a result
of the adoption of Proposal No. 1 and Proposal No. 3 set forth above).
All of the Proposals are designed to expedite the prompt consummation of
Purchaser's proposed acquisition of the Company. Chesapeake and Purchaser are
prepared to commence immediate good faith negotiations with the Company Board
regarding the possibility of increasing the Offer (as defined below) after
appropriate due diligence and access to the Company's business plan, as well
as the possibility of utilizing alternatives to an all-cash structure that
could offer tax advantages to certain of the Company's stockholders.
The Company has been unwilling to accept Chesapeake's proposed acquisition
of the Company. On December 3, 1999, Chesapeake and Purchaser filed a Tender
Offer Statement on Schedule 14D-1 (the "Schedule 14D-1") with the Securities
and Exchange Commission (the "Commission") and Purchaser commenced an offer to
purchase all outstanding shares of Common Stock of the Company, together with
the associated rights to purchase preferred stock (the "Rights") issued
pursuant to the Rights Agreement, dated as of June 12, 1995 (together with any
subsequent amendments thereto, the "Rights Agreement"), between the Company
and The Bank of New York, as Rights Agent (the Common Stock, together (unless
the context otherwise requires) with the Rights, being herein referred to as
the "Shares"), at $17.25 per Share, net to the seller in cash, upon the terms
and subject to the conditions set forth in the Offer to Purchase, dated
December 3, 1999 (the "Offer to Purchase"), and in the related Letter of
Transmittal (which, together with any amendments or supplements thereto,
collectively constitute the "Offer").
The purpose of the Offer is to acquire for cash a majority of the
outstanding Shares of, and ultimately the entire equity interest in, the
Company. Purchaser currently intends, as soon as practicable upon consummation
of the Offer, to propose and seek to have the Company effect a merger or
similar business combination (the "Proposed Merger") between the Company and
Purchaser or an affiliate thereof, pursuant to which each then outstanding
Share (other than Shares held by the Company in treasury, or owned by
Chesapeake, Purchaser or any other direct or indirect wholly owned subsidiary
of Chesapeake, or Shares, if any, that are held by
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Stockholders who are entitled to and who properly exercise appraisal rights
under the Delaware General Corporation Law (the "DGCL")) would be converted
pursuant to the terms of the Proposed Merger into the right to receive an
amount in cash equal to the per Share price paid pursuant to the Offer,
without interest.
Chesapeake has entered into a stock purchase agreement with an investment
adviser with discretionary authority over its client's shares pursuant to
which Chesapeake has agreed to purchase 4,106,440 Shares, or approximately
14.9% of the Company's outstanding Shares. Also, pursuant to such stock
purchase agreement, the investment adviser has agreed to use its best efforts
to exercise its discretionary authority to cause its clients to tender such
Shares in the Offer and to execute written consents in the form solicited by
Chesapeake in this Consent Solicitation. See Schedule III hereto.
This Consent Statement is neither a request for the tender of Shares nor an
offer with respect thereto. The Offer is being made only by means of the Offer
to Purchase and the related Letter of Transmittal.
The Offer is conditioned upon, among other things: (i) there being validly
tendered prior to the expiration of the Offer and not withdrawn a number of
Shares which, together with the Shares beneficially owned by Chesapeake and
its subsidiaries, including the Purchaser, will constitute at least a majority
of the outstanding Shares on a fully diluted basis as of the date the Shares
are accepted for payment pursuant to the Offer (the "Minimum Tender
Condition"); (ii) the Rights having been redeemed by the Company Board or
Purchaser otherwise being satisfied, in its sole discretion, that such Rights
are otherwise invalid or inapplicable to the Offer and the Proposed Merger
(the "Rights Condition"); (iii) the acquisition of Shares pursuant to the
Offer and the Proposed Merger having been approved pursuant to Section 203 of
the DGCL ("Section 203") or Purchaser being satisfied, in its sole discretion,
that the provisions of Section 203 restricting certain business combinations
are invalid or inapplicable to the acquisition of Shares pursuant to the Offer
and the Proposed Merger (the "Section 203 Condition"); and (iv) any waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the regulations thereunder and any laws of Canada, the European
Union, any member state of the European Union, and any other foreign
jurisdictions applicable to the purchase of Shares pursuant to the Offer
having expired or been terminated. The Offer is also subject to certain other
conditions described in Section 13 of the Offer to Purchase. The Offer is not
conditioned upon Chesapeake or Purchaser obtaining financing.
Based upon discussions and correspondence between the management of
Chesapeake and the management of Shorewood, and in light of the Company
Board's adoption of the Bylaw Amendments (as defined below), Purchaser
believes that the current Company Board may be unwilling to redeem the Rights
(or to amend the Rights Agreement to make the Rights inapplicable to the Offer
and the Proposed Merger) and to approve the Offer and the Proposed Merger
under Section 203 and thus permit the Offer and the Proposed Merger to be
consummated. See Schedule I hereto for a discussion of the background of the
Offer.
Accordingly, pursuant to the Proposals, Purchaser is seeking to elect to the
Company Board persons who will consider, consistent with their fiduciary
duties to the Company and its stockholders, whether to redeem the Rights (or
amend the Rights Agreement to make the Rights inapplicable to the Offer and
the Proposed Merger) and approve the Offer and the Proposed Merger under
Section 203, which would satisfy the Rights Condition and the Section 203
Condition, and take such other actions as may be required to expedite the
prompt consummation of the Offer and the Proposed Merger. Chesapeake and
Purchaser expect that, subject to their fiduciary duties under applicable law,
the Nominees would redeem the Rights (or amend the Rights Agreement to make
the Rights inapplicable to the Offer and the Proposed Merger) and approve the
Offer and the Proposed Merger under Section 203, which would satisfy the
Rights Condition and the Section 203 Condition, and take such other actions as
may be required to expedite the prompt consummation of the Offer and the
Proposed Merger. Therefore, adoption of the Proposals is expected to expedite
the prompt consummation of the Offer and the Proposed Merger.
Stockholders are being asked to give their consent to the Proposals on the
accompanying WHITE consent card. Each Proposal will become effective when
properly completed, unrevoked and effective consent cards (or
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other forms of consent) indicating consent to such Proposal, signed by holders
of record on the record date for this Consent Solicitation (the "Record Date")
of the Requisite Number (as defined below) of the Shares then outstanding, are
delivered to Shorewood. The Record Date shall be determined as set forth in
this Consent Solicitation under "The Consent Procedure--General; Effectiveness
of Consents."
On December 3, 1999, Chesapeake and Purchaser commenced a lawsuit in the
Court of Chancery of the State of Delaware against the Company and its Board
of Directors seeking, among other things, an order (i) declaring that the
Company Board breached its fiduciary duties by adopting certain amendments to
the Company's bylaws, which amendments were first publicly announced on
December 2, 1999 (the "Bylaw Amendments"), which amendments, among other
things, purport to require the affirmative vote of holders of two-thirds of
the outstanding shares of Common Stock for the stockholders to amend, add to,
alter or repeal the Company's bylaws (the "Super Majority Bylaw") and purport
to reserve to the Company Board the exclusive right to set the record date for
a solicitation of written consents from the Company's stockholders (the
"Consent Record Date Bylaw"), (ii) declaring the Super Majority Bylaw and the
Consent Record Date Bylaw void, and enjoining the Company Board from
implementing the Super Majority Bylaw, the Consent Record Date Bylaw and the
Bylaw Amendments as a whole, (iii) declaring that failure to redeem the Rights
or to render the Rights inapplicable to the Offer and the Proposed Merger or
to approve the Offer and the Proposed Merger would constitute a breach of the
Company Board's fiduciary duties under Delaware law, (iv) invalidating the
Rights or compelling the Company Board to redeem the Rights or render the
Rights inapplicable to the Offer and the Proposed Merger, (v) declaring that
failure to approve the Offer and the Proposed Merger for purposes of Section
203 of the DGCL would constitute a breach of the Company Board's fiduciary
duties under Delaware law, (vi) compelling the Company Board to approve the
Offer and the Proposed Merger for purposes of Section 203 of the DGCL,
(vii) enjoining the Company Board from taking any other actions designed to
impede or which have the effect of impeding the Offer, the Consent
Solicitation or the Proposed Merger and declaring that any such actions would
constitute a breach of the Company Board's fiduciary duties under Delaware
law, and (viii) enjoining the Company Board from taking any other actions to
impede, or refuse to recognize the validity of, the Consent Solicitation.
Also on December 3, 1999, Chesapeake and Purchaser commenced litigation
against the Company in the United States District Court for the District of
Delaware seeking, among other things, a declaratory judgment that Chesapeake
and Purchaser have disclosed all information required by, and are otherwise in
full compliance with, the Exchange Act and any other federal securities laws,
rules or regulations deemed applicable to the Offer and the Consent
Solicitation.
If the court grants the requested injunction or otherwise holds the Super
Majority Bylaw to be ineffective, or if the Company Board repeals the Super
Majority Bylaw, then the "Requisite Number" of the Shares required to approve
any of the Proposals will be a majority of the outstanding Shares entitled to
vote at a meeting of stockholders. If the court does not grant the requested
injunction or otherwise hold the Super Majority Bylaw to be ineffective and if
the Company Board does not repeal the Super Majority Bylaw, then the
"Requisite Number" of the Shares required to approve any of the Proposals will
be two-thirds of the outstanding Shares.
Each of Proposal Nos. 3-5 is conditioned upon the approval of Proposal No.
1. In addition, Proposal No. 2 is conditioned upon the approval of Proposal
No. 1 and at least one of the Nominees listed in Proposal No. 4 being elected
as a member of the Company Board. None of Proposal Nos. 3-5 is conditioned
upon the approval of any other of Proposal Nos. 3-5.
Because a Proposal will not become effective unless executed consents to
adopt such Proposal are returned by holders of record of the Requisite Number
of the Shares then outstanding on the Record Date, the following actions will
have the same effect as voting against such Proposal: (i) failing to execute
and return a consent with respect to such Proposal or (ii) executing and
returning a consent marked "ABSTAINS" or "WITHHOLDS CONSENT" with respect to
such Proposal.
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Executing and returning a consent marked to indicate the withholding of
consent to the election of any Nominee will have the effect of a vote against
the election of such Nominee.
Adoption of the Proposals, including the removal of the current members of
the Company Board and election of the Nominees, is an important step toward
prompt consummation of the Offer and the Proposed Merger. Accordingly,
Purchaser urges you to promptly sign, date and mail the enclosed WHITE consent
card.
You must separately tender your Shares pursuant to the Offer if you wish to
participate in the Offer. Executing a consent does not obligate you to tender
your Shares pursuant to the Offer, and your failure to execute a consent does
not prevent you from tendering your Shares pursuant to the Offer.
IMPORTANT
Only Stockholders of record on the Record Date are entitled to give their
consent to the Proposals. Thus:
1. If your Shares are held in your own name, please sign, date and mail
the enclosed WHITE consent card in the postage-paid envelope provided.
2. If your Shares are held in the name of a brokerage firm, bank nominee
or other institution, only such entity can execute a consent on your behalf
and only upon receipt of your specific instructions. Accordingly, you
should sign, date and mail the enclosed WHITE consent card in the envelope
provided by your broker.
If you have any questions or require any assistance in executing your
consent card, please call Purchaser's information agent D.F. King & Co., Inc.
at 1-800-578-5378 (toll free).
Purchaser requests that completed, signed and dated WHITE consent cards be
returned to it on or before its publicly announced target date of December ,
1999. A FAILURE TO SIGN AND RETURN THE WHITE CONSENT CARD IN A TIMELY MANNER
WILL HAVE THE SAME EFFECT AS A VOTE AGAINST PURCHASER'S PROPOSALS.
REASONS FOR THE CONSENT SOLICITATION
Purchaser is soliciting consents to the Proposals in order to expedite the
prompt consummation of the Offer and the Proposed Merger. The purpose of the
Offer is to acquire for cash a majority of the outstanding Shares of, and
ultimately the entire equity interest in, the Company. Purchaser currently
intends, as soon as practicable upon consummation of the Offer, to propose and
seek to have the Company effect the Proposed Merger.
The consideration that would be received by Stockholders in the Offer and
the Proposed Merger reflects a substantial premium over the unaffected closing
price of the Shares of $13.38 per Share on November 17, 1999, the last full
trading day prior to the first public announcement of Purchaser's proposal to
acquire the Company.
The Nominees will consider, consistent with their fiduciary duties to the
Company and the Stockholders, whether to redeem the Rights (or amend the
Rights Agreement to make the Rights inapplicable to the Offer and the Proposed
Merger) and approve the Offer and the Proposed Merger under Section 203, which
would satisfy the Rights Condition and the Section 203 Condition, and take
such other actions as may be required to expedite the prompt consummation of
the Offer and the Proposed Merger. Chesapeake and Purchaser expect that,
subject to their fiduciary duties under applicable law, the Nominees would
redeem the Rights (or amend the Rights Agreement to make the Rights
inapplicable to the Offer and the Proposed Merger) and approve the Offer and
the Proposed Merger under Section 203, which would satisfy the Rights
Condition and the Section 203 Condition, and take such other actions as may be
required to expedite the prompt consummation of the Offer and the Proposed
Merger. Therefore, adoption of the Proposals is expected to expedite the
prompt consummation of the Offer and the Proposed Merger.
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THE PROPOSALS
PURCHASER RECOMMENDS THAT YOU DELIVER YOUR CONSENT CARD TO CONSENT TO EACH
OF THE PROPOSALS.
Set forth below is a description of the Proposals for which consents are
solicited hereby:
PROPOSAL NO. 1--REMOVAL OF PROVISION ESTABLISHING CLASSIFIED BOARD
The Amended Bylaws currently provide that the Company Board shall be divided
into three classes elected to serve for staggered terms of three years.
Proposal No. 1 provides for the amendment of Article III, Sections 1 and 2 of
the Amended Bylaws to remove the provision establishing a staggered board of
directors and to require the annual election of all directors. In particular,
the amendment would (i) delete the second, third and fourth sentences of
Article III, Section 1 and insert in lieu thereof the sentence "Directors
shall be elected annually to serve for one year terms" and (ii) delete in the
third sentence of Article III, Section 2 the phrase "at which directors of
this class are to be elected." With the annual election of directors, the
Company's stockholders would have the ability to hold all directors
accountable on an annual basis.
PROPOSAL NO. 2--REMOVAL OF DIRECTORS
Proposal No. 2 provides for the removal of the nine current members of the
Company Board, Kevin J. Bannon, Sharon R. Fairley, Virginia A. Kamsky, Howard
M. Liebman, R. Timothy O'Donnell, Andrew N. Shore, Marc P. Shore, Leonard J.
Verebay, and William P. Weidner, and any other person or persons who may be
members of the Company Board at the time the Proposals become effective (other
than the persons elected as a result of the adoption of Proposal No. 4, which
is described below).
PROPOSAL NO. 3--BYLAW AMENDMENT FIXING NUMBER OF DIRECTORS AT THREE
The Amended Bylaws currently provide that the Company Board shall consist of
not less than three nor more than twelve directors, as shall be determined by
resolution of the Company Board. Proposal No. 3 provides for the amendment of
Article III, Section 1 of the Amended Bylaws to fix the number of directors of
Shorewood at three. In particular, the amendment would delete the phrase "to
consist of not less than three nor more than twelve directors, as shall be
determined by resolution of the Board of Directors from time to time" in such
Section 1, and insert in lieu thereof the phrase "to consist of three (3)
directors."
PROPOSAL NO. 4--ELECTION OF NOMINEES
Proposal No. 4 provides for the election of the Nominees named in the table
below as the three directors of Shorewood, to serve until the next annual
meeting of Stockholders and until their successors have been duly elected and
qualified.
The receipt of consents from the holders of the Requisite Number of the
Shares outstanding on the Record Date consenting to the Nominees shall be
sufficient to elect the Nominees.
Purchaser's primary purpose in seeking to elect the Nominees to the Company
Board is for the Nominees to consider, subject to the Nominees' fiduciary
duties under applicable law, redeeming the Rights (or amending the Rights
Agreement to make the Rights inapplicable to the Offer and the Proposed
Merger) and approving the Offer and the Proposed Merger under Section 203,
thereby facilitating the consummation of Purchaser's acquisition of Shorewood.
However, if elected, the Nominees would be responsible for managing the
business and affairs of the Company.
Each director of the Company has an obligation under the DGCL to discharge
his or her duties as a director on an informed basis, in good faith, with the
care an ordinarily careful and prudent person in a like position would
exercise under similar circumstances and in a manner such director honestly
believes to be in the best interests of the Company.
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In this context, circumstances may arise in which the interests of Purchaser
and its affiliates, on the one hand, and the interests of other Stockholders,
on the other hand, may differ.
Each of the Nominees has consented to being named herein as a nominee for
director of the Company and has agreed to stand for election as such a
director.
Although Purchaser has no reason to believe that any of the Nominees will be
unable to serve as directors, if any Nominee is not available to serve,
Purchaser expects that the remaining Nominee(s), upon taking office, would
fill the vacancy with an individual willing to consider and implement
acquisition proposals in the manner described herein.
The information below concerning age, business address, principal
occupation, employment history, directorships and beneficial ownership of
Common Stock of the Nominees has been furnished by the respective Nominees.
<TABLE>
<CAPTION>
Present Principal Occupation
Name, Age and and Five-Year Employment
Business Address History; Directorships
- ---------------- ----------------------------
<S> <C>
[TO BE ADDED PRIOR TO DISTRIBUTION TO THE
COMPANY'S STOCKHOLDERS--Chesapeake and Purchaser
expect that the Nominees will be persons who are
not currently affiliates of Chesapeake or
Purchaser]
</TABLE>
Except as disclosed in this Consent Statement (including the Schedules
hereto), none of Chesapeake, Purchaser, or, to the best knowledge of Purchaser
or Chesapeake, their respective directors or executive officers, the Nominees
or the other representatives of Purchaser or Chesapeake named in Schedule II
hereto, owns any securities of the Company or any parent or subsidiary of the
Company, beneficially or of record, has purchased or sold any such securities
within the past two years, or is or was within the past year a party to any
contract, arrangement or understanding with any person with respect to such
securities.
Except as disclosed in this Consent Statement (including the Schedules
hereto), to the best knowledge of Purchaser, Chesapeake, their directors or
executive officers, the Nominees and the other representatives of Purchaser or
Chesapeake named in Schedule II, none of their associates beneficially owns,
directly or indirectly, any securities of the Company or any parent or
subsidiary of the Company.
Except as disclosed in this Consent Statement (including the Schedules
hereto), none of Purchaser, Chesapeake, or, to the best knowledge of Purchaser
and Chesapeake, their respective directors or executive officers, the
Nominees, the other representatives of Purchaser or Chesapeake named in
Schedule II hereto, or, to their best knowledge, their associates, has any
arrangement or understanding with any person (i) with respect to any future
employment by the Company or its affiliates or (ii) with respect to future
transactions to which the Company or any of its affiliates will or may be a
party, nor any material interest, direct or indirect, in any transaction that
has occurred since May 3, 1998, or any currently proposed transaction, or
series of similar transactions, which the Company or any of its affiliates was
or is to be a party and in which the amount involved exceeds $60,000.
Certain Nominees, directors and executive officers of Chesapeake or
Purchaser and/or their respective associates may also be directors or officers
of other companies and organizations that have engaged in transactions with
the Company or its subsidiaries in the ordinary course of business since May
3, 1998, but Chesapeake and Purchaser believe that the interest of such
persons in such transactions, if any, is not material.
Purchaser has agreed to reimburse each Nominee for out-of-pocket expenses
incurred in connection with this Consent Solicitation.
In addition, Purchaser has agreed to indemnify each Nominee, to the fullest
extent permitted by applicable law, from and against any and all expenses,
liabilities, damages or losses of any kind arising out of any threatened
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or filed action, suit or proceeding, whether civil, criminal, administrative
or investigative, asserted against or incurred by the Nominee as a result of
such Nominee's involvement in the Consent Solicitation or such Nominee's role
as a director of Shorewood in connection with considering all proposals to
acquire Shorewood submitted directly or indirectly as the result of the
Proposed Merger and implementing any such proposal.
In addition, it is anticipated that each Nominee, if elected, would be
entitled to receive an appropriate pro rata portion of directors' fees paid
consistent with Shorewood's past practices. According to Shorewood's Proxy
Statement, dated August 23, 1999, nonemployee directors of Shorewood are paid
an annual retainer for Company Board service of $8,000, and an attendance fee
of $2,000 and $1,000 for each Company Board and committee meeting (ordinarily
excluding Company Board or committee meetings held by telephone conference
call) attended, respectively.
Directors are also reimbursed for certain expenses incurred in connection
with attendance at regular or special meetings of the Company Board or any of
its committees.
As is described above under "The Consent Solicitation" and "Reasons For The
Consent Solicitation," the Nominees will consider, consistent with their
fiduciary duties to the Company and the Stockholders, whether to expedite the
prompt consummation of the Offer and the Proposed Merger by, among other
things, taking action to satisfy the Rights Condition and the Section 203
Condition. Chesapeake and Purchaser expect that, subject to their fiduciary
duties under applicable law, the Nominees would expedite the prompt
consummation of the Offer and the Proposed Merger by, among other things,
taking action to satisfy the Rights Condition and the Section 203 Condition.
PROPOSAL NO. 5--REPEAL OF BYLAWS ADOPTED SUBSEQUENT TO NOVEMBER 22, 1999
Proposal No. 5 provides for the repeal of each amendment of the Amended
Bylaws (whether effected by supplement to, deletion from or revision of the
Amended Bylaws) adopted subsequent to November 22, 1999, and at or prior to
the time the Proposals become effective (other than the amendments adopted as
a result of the adoption of Proposal No. 1 and Proposal No. 3, which are
described above).
On December 2, 1999, the Company publicly disclosed that the Company Board
had adopted the Amended Bylaws effective as of November 22, 1999. Accordingly,
this Proposal No. 5 would not repeal any provision of the Amended Bylaws in
effect as of November 22, 1999 (although, as noted above, (i) Proposal No. 1
and Proposal No. 3 would amend Article III, Sections 1 and 2 of the Amended
Bylaws, and (ii) Chesapeake and Purchaser have commenced a lawsuit challenging
the validity of the Bylaw Amendments). If, however, the Board has adopted
since November 22, 1999, or adopts at or prior to the time the Proposals
become effective, any amendment to the Amended Bylaws, this Proposal would
repeal such amendment so as to prevent the Board from creating new obstacles
to the effectiveness of the Proposals or the consummation of an acquisition of
Shorewood (pursuant to the Offer and the Proposed Merger or otherwise) and to
remove any existing undisclosed obstacles to the consummation of the
effectiveness of the Proposals or an acquisition of Shorewood (pursuant to the
Offer and the Proposed Merger or otherwise).
Adoption of the Proposals, including the removal of the current members of
the Company Board and election of the Nominees, is an important step toward
prompt consummation of the Offer and the Proposed Merger. Accordingly,
Purchaser urges you to promptly sign, date and mail the enclosed WHITE consent
card in the envelope provided. You must separately tender your Shares pursuant
to the Offer if you wish to participate in the Offer.
Executing a consent does not obligate you to tender your Shares pursuant to
the Offer, and your failure to execute a consent does not prevent you from
tendering your Shares pursuant to the Offer.
THE PROPOSED ACQUISITION
Chesapeake and Purchaser are prepared to commence immediate good faith
negotiations with the Company Board regarding the possibility of increasing
the Offer after appropriate due diligence and access to the
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<PAGE>
Company's business plan, as well as the possibility of utilizing alternatives
to an all-cash structure that could offer tax advantages to certain of the
Company's stockholders. To date, the Company has been unwilling to negotiate
with Chesapeake.
On November 26, 1999, Chesapeake entered into a stock purchase agreement
(the "Purchase Agreement") with Ariel Capital Management, Inc. ("Ariel")
pursuant to which Ariel agreed to use its best efforts as investment adviser
to exercise its discretionary authority to cause Ariel's clients to sell
approximately 4,106,440 Shares, or approximately 14.9% of the Company's
outstanding Shares, to Chesapeake at a purchase price of $17.25 per Share.
Also, pursuant to such stock purchase agreement, Ariel has agreed to use its
best efforts to exercise its discretionary authority to cause its clients to
tender such Shares in the Offer and to execute written consents in the form
solicited by Chesapeake in this Consent Solicitation. See Schedule III hereto.
On December 3, 1999, Chesapeake commenced the Offer to acquire all of the
outstanding Shares for $17.25 in cash per Share.
If the Offer and Proposed Merger are to proceed, the Company Board must
approve the Proposed Merger and take all action necessary to satisfy the
conditions to the Offer, or the present members of the Company Board must be
removed and the Nominees elected in their place, who Chesapeake and Purchaser
expect, subject to their fiduciary duties as directors of the Company under
applicable law, would expedite the prompt consummation of the Offer and the
Proposed Merger.
THE OFFER
On December 3, 1999, Purchaser commenced the Offer.
On November 17, 1999, the last full trading day prior to the public
disclosure that Chesapeake had made a proposal to acquire the Company for
$16.50 a Share, the closing price per Share reported on the New York Stock
Exchange was $13.38. On December 2, 1999, the last full trading day prior to
the commencement of the Offer, the closing price per Share reported on the New
York Stock Exchange was $15.69. On December , 1999, the last trading day
prior to the date of this Consent Statement, the closing price per Share
reported on the New York Stock Exchange was $ .
Stockholders are urged to obtain a current market quotation for the Shares.
Complete information about the Offer is contained in the Offer to Purchase,
which is available upon request from D.F. King & Co., Inc., the Information
Agent for the Offer, by calling 1-800-578-5378, and in the Schedule 14D-1,
which was filed with the Commission on December 3, 1999. The Schedule 14D-1
and any amendments thereto, including exhibits, should be available for
inspection and copies should be obtainable in the manner set forth under
"Certain Information Concerning Chesapeake And Purchaser." For a description
of the background of the Offer, see Schedule I hereto.
Purpose of the Offer
The purpose of the Offer is to acquire for cash a majority of the
outstanding Shares of, and ultimately the entire equity interest in, the
Company. Purchaser currently intends, as soon as practicable upon consummation
of the Offer, to propose and seek to have the Company effect the Proposed
Merger between the Company and Purchaser or an affiliate thereof, pursuant to
which each then outstanding Share (other than Shares held by the Company in
treasury, or owned by Chesapeake, Purchaser or any other direct or indirect
wholly owned subsidiary of Chesapeake, or Shares, if any, that are held by
Stockholders who are entitled to and who properly exercise appraisal rights
under Delaware law) would be converted pursuant to the terms of the Proposed
Merger into the right to receive an amount in cash equal to the per Share
price paid pursuant to the Offer, without interest.
Certain Terms and Conditions of the Offer
The Offer is subject to the terms and conditions set forth in the Offer to
Purchase and the related Letter of Transmittal.
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<PAGE>
Certain terms of the Offer are summarized below:
Upon the terms and subject to the conditions set forth in the Offer,
Purchaser will accept for payment, and pay $17.25 per Share, net to the seller
in cash, for all Shares validly tendered on or prior to the Expiration Date
(as defined herein) and not withdrawn as permitted.
The term "Expiration Date" means 12:00 Midnight, New York City time, on
January 3, 2000, unless and until Purchaser shall, in its sole discretion,
have extended the period for which the Offer is open, in which event the term
"Expiration Date" shall mean the latest time and date on which the Offer, as
so extended by Purchaser, shall expire.
In addition to the Rights Condition and the Section 203 Condition described
above, the Offer is conditioned, among other things, upon the following:
The Minimum Tender Condition. The minimum tender condition conditions the
Offer upon there being validly tendered prior to the Expiration Date and not
withdrawn a number of Shares (the "Minimum Number of Shares") which, together
with the shares beneficially owned by Purchaser and its affiliates, will
constitute a majority of the outstanding Shares on a fully diluted basis as of
the date the Shares are accepted for payment pursuant to the Offer (the
"Minimum Tender Condition").
Purchaser reserves the right (subject to the applicable rules and
regulations of the Commission) to waive or reduce the Minimum Tender Condition
and to elect to purchase, pursuant to the Offer, fewer than the Minimum Number
of Shares.
The Antitrust Condition. The Offer is conditioned on any waiting period
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
and the regulations thereunder and any laws of Canada, the European Union, any
member state of the European Union, and any other foreign jurisdictions
applicable to the purchase of Shares pursuant to the Offer having expired or
been terminated.
Certain other conditions to the Offer are described in Section 13 of the
Offer to Purchase. Purchaser reserves the right (but shall not be obligated)
to waive any or all such conditions.
The Offer is not conditioned upon Chesapeake or Purchaser obtaining
financing.
Certain Other Information About the Offer
Although the adoption of the Proposals is an important step toward
satisfying the conditions of the Offer, Stockholders are not being asked to
tender their Shares pursuant to this Consent Solicitation.
Purchaser has reserved the right to amend the terms of the Offer and the
Proposed Merger in light of future developments. Such developments could
include, without limitation, actions that Shorewood or the Company Board may
take and material adverse changes in Shorewood's business.
For information concerning a complaint filed by Chesapeake and Purchaser in
the Delaware Chancery Court relating to the Bylaw Amendments and certain of
Shorewood's anti-takeover defenses and a complaint filed in United States
District Court for the District of Delaware relating to Chesapeake's and
Purchaser's compliance with the federal securities laws, see "Litigation"
below.
THE CONSENT PROCEDURE
General; Effectiveness of Consents
Section 228 of the DGCL provides that, unless otherwise provided in the
certificate of incorporation of a corporation, any action required to be or
that may be taken at a meeting of stockholders may be taken without a meeting,
without prior notice and without a vote, if written consents setting forth the
action so taken, are signed, dated and delivered to the corporation by the
holders of outstanding shares having not less than the minimum number of votes
that would be necessary to take such action at a meeting at which all shares
entitled to vote thereon were present and voted.
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<PAGE>
The Certificate of Incorporation of Shorewood, as amended, does not prohibit
stockholder action by written consent.
Under Section 213 of the DGCL, the Company Board may fix a record date to
determine the stockholders entitled to consent to corporate action in writing
without a meeting (the "Record Date"). The Record Date shall not precede the
date upon which the resolution fixing the Record Date is adopted by the
Company Board and shall not be more than ten days after the date upon which
the resolution fixing the Record Date is adopted by the Company Board. If no
Record Date has been fixed by the Company Board, the Record Date shall be the
first date on which a signed written consent setting forth the action taken or
proposed to be taken is delivered to the Company by delivery to its registered
office in Delaware, its principal place of business, or an officer or agent of
the Company having custody of the book in which proceedings of meetings of
stockholders are recorded. The Company Board has not yet fixed a Record Date
in connection with the consents subject to this Consent Solicitation. On
December , 1999, Purchaser delivered to the Company a written consent in
compliance with Section 213 of the DGCL indicating consent to the Proposals
described in this Consent Solicitation. Accordingly, the Record Date in
connection with the consents subject to this Consent Solicitation is December
, 1999.
Each Proposal will become effective when properly completed, unrevoked and
effective consent cards (or other forms of consent) indicating consent to such
Proposal, signed by the holders of record on the Record Date of a Requisite
Number of the shares of Common Stock then outstanding, are delivered to
Shorewood, provided that the Requisite Number of consents is delivered within
60 days of the earliest dated consent delivered to Shorewood.
If the Proposals are adopted pursuant to this Consent Solicitation, prompt
notice will be given pursuant to Section 228(d) of the DGCL to eligible
Stockholders who have not executed and returned consent cards consenting to
each of the Proposals.
Because a Proposal will not become effective unless executed consent cards
to adopt such Proposal are returned by holders of record on the Record Date of
a Requisite Number of the Shares then outstanding, the following actions will
have the same effect as voting against such Proposal: (i) failing to execute
and return a consent with respect to such Proposal or (ii) executing and
returning a consent marked "ABSTAINS" or "WITHHOLDS CONSENT" with respect to
such Proposal.
Executing and returning a consent marked to indicate the withholding of
consent to the election of any Nominee will have the effect of a vote against
the election of such Nominee.
Procedural Instructions
If a Stockholder is a record holder of Shares as of the close of business on
the Record Date, such Stockholder may elect to consent to, withhold consent to
or abstain with respect to each Proposal by marking the "CONSENTS," "WITHHOLDS
CONSENT" or "ABSTAINS" box, as applicable, underneath each such Proposal on
the accompanying WHITE consent card and signing, dating and returning it
promptly in the enclosed envelope.
In addition, a Stockholder may withhold consent to the removal of any
individual member of the Board or to the election of any individual Nominee by
writing such person's name where indicated on the consent card. The
effectiveness of each of Proposal Nos. 3-5 is conditioned upon the approval of
Proposal No. 1. In addition, Proposal No. 2 is conditioned upon the approval
of Proposal No. 1 and at least one of the Nominees listed in Proposal No. 4
being elected as a member of the Company Board. None of Proposal Nos. 3-5 is
conditioned upon the approval of any other of Proposal Nos. 3-5. If a
Stockholder returns a consent card that is signed and not marked with respect
to any Proposal, such Stockholder will thereby consent to that Proposal in its
entirety, except that such Stockholder will not thereby consent to the removal
of any member of the Board or the election of any Nominee whose name is
written by the Stockholder on the consent card.
Under the DGCL, only Stockholders of record on the Record Date are eligible
to give their consent to the Proposals. Therefore, Purchaser urges each
Stockholder, even if such Stockholder has subsequently
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<PAGE>
sold its Shares, to grant its consent pursuant to the enclosed WHITE consent
card with respect to all Shares held as of the Record Date. A Stockholder's
failure to consent may adversely affect those who continue to be Stockholders.
In addition, if your Shares are held in the name of a brokerage firm, bank
nominee or other institution, only such entity can execute a consent on your
behalf and only upon receipt of your specific instructions. Accordingly, you
should sign, date and mail the enclosed WHITE consent card in the envelope
provided by your broker.
Revocation of Consents
A Proposal will not become effective unless executed consents to adopt such
Proposal are returned by holders of record on the Record Date of a Requisite
Number of the Shares then outstanding. Executed consents with respect to any
Proposal may be revoked at any time prior to the time that such Proposal
becomes effective, provided that a written, dated revocation that clearly
identifies the consent being revoked is executed and delivered either to (i)
Purchaser in care of Corporate Election Services, P.O. Box 1150, Pittsburgh,
Pennsylvania 15230, or (ii) the principal executive offices of the Company at
277 Park Avenue, New York, New York 10172.
A revocation may be in any written form validly signed by the record holder
as long as it clearly states that the consent previously given is no longer
effective. Purchaser requests that a copy of any revocation sent to the
Company be sent to Purchaser at the above address so that Purchaser may more
accurately determine if and when consents to the Proposals have been received
from the holders of record on the Record Date of a Requisite Number of the
Shares then outstanding.
Appraisal Rights
Holders of Shares do not have appraisal rights as a result of the Offer.
However, if the Proposed Merger is consummated, each holder of Shares whose
Shares are to be converted in the Proposed Merger and who has neither voted in
favor of the Proposed Merger nor consented thereto in writing will be entitled
to an appraisal by the Delaware Court of Chancery of the fair value of such
Stockholder's Shares, exclusive of any element of value arising from the
accomplishment or expectation of the Proposed Merger, together with a fair
rate of interest, if any, to be paid. In determining such fair value, the
Court may consider all relevant factors. The value so determined could be more
or less than the consideration to be paid in the Offer and the Proposed
Merger. Any judicial determination of the fair value could be based upon
considerations other than or in addition to the market value of the Shares,
including, among other things, asset values and earning capacity.
If any holder of Shares who demands appraisal under Section 262 of the DGCL
fails to perfect, or effectively withdraws or loses such Stockholder's right
to appraisal as provided in the DGCL, the Shares of such Stockholder will be
converted into the right to receive the merger consideration pursuant to the
Proposed Merger.
The foregoing discussion is not a complete statement of law pertaining to
appraisal rights under the DGCL and is qualified in its entirety by the full
text of Section 262 of the DGCL.
Failure to follow the steps required by Section 262 of the DGCL for
perfecting appraisal rights may result in the loss of such rights.
CHESAPEAKE AND PURCHASER
Chesapeake, a Virginia corporation headquartered in Richmond, Virginia, is
primarily engaged in the manufacture and sale of specialty packaging, point-
of-purchase displays and merchandising services. Chesapeake conducts its
business in two segments. Chesapeake's Merchandising and Specialty Packaging
segment produces and sells point-of-sale displays, graphic packaging and
corrugated shipping containers and provides merchandising services. The
European Specialty Packaging segment, which is comprised of the Field Group
plc operations, produces folding cartons for food/consumer and
pharmaceutical/healthcare companies. Chesapeake's common stock is listed on
the New York Stock Exchange and, as of December 2, 1999, Chesapeake had a
market capitalization of $539 million.
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<PAGE>
Chesapeake is subject to the informational requirements of the Exchange Act
and, in accordance therewith, files reports relating to its business,
financial condition and other matters. Information, as of particular dates,
concerning Chesapeake is required to be disclosed in reports, proxy statements
and other information filed with the Commission. Such reports, proxy
statements and other information should be available for inspection at the
Commission and copies may be obtained from the Commission, upon payment of the
Commission's customary charges, by writing to its principal office at 450
Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549 and can be
obtained electronically on the Commission's website at http://www.sec.gov.
Copies of the Schedule 14D-1, including the Offer to Purchase that forms a
part thereof, may be obtained in the same manner. Such materials should also
be available for inspection at the offices of the New York Stock Exchange, 20
Broad Street, New York, New York 10005.
Purchaser is a Delaware corporation and to date has engaged in no activities
other than those incident to its formation and the commencement of the Offer.
Purchaser is a wholly owned subsidiary of Chesapeake and is the record owner
of 100 Shares. The principal executive offices of Purchaser are located at
1021 East Cary Street, Richmond, Virginia 23218-2350.
As of December 3, 1999, Chesapeake was the beneficial owner of an aggregate
of 4,106,440 Shares, or approximately 14.9% of the Shares reported by the
Company to be outstanding as of September 1, 1999, and Purchaser was the
record holder of an aggregate of 100 Shares. Schedule III hereto sets forth
with respect to such Shares (i) each date of purchase, (ii) the number of
Shares purchased each such day and (iii) the average price paid therefor.
Except as described in this Consent Statement (including the Schedules
hereto), none of Purchaser, Chesapeake or, to the best knowledge of Purchaser,
any of the persons listed in Schedule II hereto, or any associate or majority
owned subsidiary of Purchaser, Chesapeake or any of the persons so listed,
beneficially owns any equity security of the Company, and none of Purchaser,
Chesapeake or, to the best knowledge of Purchaser, any of the other persons
referred to above, or any of the respective directors, executive officers or
subsidiaries of any of the foregoing, has effected any transaction in any
equity security of the Company during the past 60 days. Purchaser and
Chesapeake disclaim beneficial ownership of any Shares owned by any pension
plan of Chesapeake or any affiliate of Chesapeake.
Certain information about certain directors, executive officers, employees
and other representatives of Purchaser who, in each case, may also assist in
soliciting proxies, is set forth in the attached Schedule II.
Schedule III sets forth certain information relating to Shares owned by
Purchaser, certain individuals and the Nominees and certain transactions
between any of them and Shorewood. Schedule IV sets forth certain information,
as made available in public documents, regarding Shares held by Shorewood's
directors and executive officers.
LITIGATION
On December 3, 1999, Chesapeake and Purchaser commenced a lawsuit in the
Court of Chancery of the State of Delaware against the Company and the Company
Board seeking, among other things, an order (i) declaring that the Company
Board breached its fiduciary duties by adopting the Bylaw Amendments, (ii)
declaring the Super Majority Bylaw and the Consent Record Date Bylaw void, and
enjoining the Company Board from implementing the Super Majority Bylaw, the
Consent Record Date Bylaw and the Bylaw Amendments as a whole, (iii) declaring
that failure to redeem the Rights or to render the Rights inapplicable to the
Offer and the Proposed Merger or to approve the Offer and the Proposed Merger
would constitute a breach of the Company Board's fiduciary duties under
Delaware law, (iv) invalidating the Rights or compelling the Company Board to
redeem the Rights or render the Rights inapplicable to the Offer and the
Proposed Merger, (v) declaring that failure to approve the Offer and the
Proposed Merger for purposes of Section 203 of the DGCL would constitute a
breach of the Company Board's fiduciary duties under Delaware law, (vi)
compelling the Company Board to
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<PAGE>
approve the Offer and the Proposed Merger for purposes of Section 203 of the
DGCL, (vii) enjoining the Company Board from taking any other actions designed
to impede or which have the effect of impeding the Offer, this Consent
Solicitation or the Proposed Merger and declaring that any such actions would
constitute a breach of the Company Board's fiduciary duties under Delaware
law, and (viii) enjoining the Company Board from taking any other actions to
impede, or refuse to recognize the validity of, this Consent Solicitation.
Also on December 3, 1999, Chesapeake and Purchaser commenced litigation
against the Company in the United States District Court for the District of
Delaware seeking, among other things, a declaratory judgment that Chesapeake
and Purchaser have disclosed all information required by, and are otherwise in
full compliance with, the Exchange Act and any other federal securities laws,
rules or regulations deemed applicable to the Offer and this Consent
Solicitation.
OWNERSHIP OF COMMON STOCK
Each share of Common Stock is entitled to one vote, and the Common Stock is
the only class of securities of Shorewood currently entitled to vote.
According to Shorewood's Annual Report on Form 10-K for the fiscal year ended
May 1, 1999, there were approximately 237 holders of record of Shares, and
according to Shorewood's Quarterly Report on Form 10-Q for the quarterly
period ended July 31, 1999, there were 27,560,000 Shares outstanding as of
September 1, 1999.
The following table sets forth the share ownership of all persons who own
beneficially more than 5% of Shorewood's outstanding Shares as reported in
Shorewood's Proxy Statement, dated August 23, 1999.
<TABLE>
<CAPTION>
Amount and Nature of Approximate
Beneficial Ownership Percent of
Name and Address of of Shares of Common Outstanding
Beneficial Owner Stock Common Stock
------------------- -------------------- ------------
<S> <C> <C>
Marc P. Shore(1).............................. 4,859,904 17.38%
c/o Shorewood Packaging Corporation
277 Park Avenue New York, NY 10172-0124
Ariel Capital Management, Inc.(2)............. 5,590,072 20.28%
307 North Michigan Avenue
Chicago, Illinois 60601
Brinson Partners, Inc.(3)..................... 1,548,722 5.62%
209 South LaSalle
Chicago, Illinois 60604-1295
</TABLE>
- --------
(1) Marc P. Shore is the Chairman and Chief Executive Officer of the Company.
The Shares reflected include: (1) 955,601 Shares owned outright by Marc
P. Shore, of which 85,650 Shares are restricted shares awarded pursuant to
the Company's Long Term Incentive Program and are subject to forfeiture;
(2) 401,953 Shares which could be acquired on or within 60 days after July
1, 1999 upon the exercise of stock options granted under the Company's
incentive and stock option plans (collectively, the "Incentive Plans"); (3)
732,150 Shares held by the Estate of Paul B. Shore (the "Estate") (see
discussion below); (4) 3,900 Shares held by a marital trust created under
the will of Paul B. Shore for the benefit of his wife (the "Marital Trust")
(see discussion below); (5) 2,700,000 Shares held by the Shore Family
Partnership, L.P., a California limited partnership (the "Family
Partnership") (see discussion below); and (6) 66,300 Shares held by the
Shore Trust (see discussion below).
Pursuant to the terms of the will of Paul B. Shore, the founder of the
Company who passed away in December 1995, Marc P. Shore has sole decision-
making power with respect to all Shares included in the
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<PAGE>
Estate. The Estate held 732,150 Shares as of July 1, 1999. Marc P. Shore
disclaims beneficial ownership with respect to 732,150 of such Shares.
The Marital Trust is a testamentary trust for the benefit of Paul B.
Shore's wife created under the terms of his will. By the terms of the will,
Marc P. Shore has sole decision-making power with respect to all Shares
owned by the Marital Trust. The Marital Trust held 3,900 Shares as of July
1, 1999. Marc P. Shore disclaims beneficial ownership with respect to 3,900
of such Shares.
The Family Partnership is an investment partnership for the benefit of
Marc P. Shore and the other children of Paul B. Shore. The Family
Partnership terminates on January 1, 2030, subject to earlier termination
by operation of law or under the terms of the Limited Partnership
Agreement. By virtue of his control over the Shore Family LLC, which is the
sole general partner of the Family Partnership, Marc P. Shore has effective
decision-making power with respect to all Shares owned by the Family
Partnership. The Family Partnership owned 2,700,000 Shares as of July 1,
1999. Marc P. Shore disclaims beneficial ownership as to 2,459,970 of such
Shares.
As of July 1, 1999, Marc P. Shore served as co-trustee of a trust (the
"Shore Trust") which held 66,300 Shares for the benefit of one other child
of Paul B. Shore. As co-trustee, Marc P. Shore shared decision-making
authority with respect to any Shares held by the Shore Trust. Marc P. Shore
disclaims beneficial ownership of all of such Shares.
(2) Represents Shares held by investment advisory clients of Ariel Capital
Management, Inc. This information is based solely upon the contents of
filings under Section 13 of the Exchange Act made by Ariel Capital
Management, Inc. Chesapeake has the right to purchase 4,106,440 of these
Shares, representing approximately 14.9% of the Company's outstanding
Shares, pursuant to the Purchase Agreement. See Schedule III hereto.
(3) Represents Shares held in managed discretionary accounts for advisory
clients which are advised by Brinson Partners, Inc. and/or its parent, UBS
AG, Inc. This information is based solely upon the contents of filings
under Section 13 of the Exchange Act made by Brinson Partners, Inc.
For information relating to the ownership of Common Stock by the current
directors and executive officers of Shorewood, see Schedule IV hereto.
The information concerning Shorewood contained in this Consent Statement has
been taken from or is based upon documents and records on file with the
Commission and other publicly available information. Purchaser has no
knowledge that would indicate that statements relating to Shorewood contained
in this Consent Statement in reliance upon publicly available information are
inaccurate or incomplete. Purchaser, however, has not been given access to the
books and records of Shorewood, was not involved in the preparation of such
information and statements, and is not in a position to verify, or make any
representation with respect to the accuracy or completeness of, any such
information or statements.
The Proxy Statement of Shorewood, dated August 23, 1999, contains additional
information concerning the Shares, beneficial ownership of the Shares by, and
other information concerning, Shorewood's directors and executive officers,
compensation paid to executive officers, and the principal holders of the
Shares. Such information, which Purchaser has not independently verified, is
incorporated by reference in this Consent Statement, upon reliance on
Shorewood.
SOLICITATION OF CONSENTS
Consents will be solicited by mail, telephone, telegraph, telex, telecopier
and advertisement and in person. Solicitation may be made by directors,
officers, investor relations personnel and other regular employees of
Chesapeake and its subsidiaries, including Purchaser, and by the Nominees.
No such employees will receive additional compensation for such
solicitation.
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<PAGE>
Banks, brokerage houses and other custodians, nominees and fiduciaries will
be requested to forward the solicitation materials to the beneficial owners of
Shares for which they hold of record and Purchaser will reimburse them for
their reasonable out-of-pocket expenses.
In addition, Purchaser has retained D.F. King & Co., Inc. ("D.F. King") to
assist and to provide advisory services in connection with this Consent
Solicitation for which D.F. King will be paid a fee estimated to be not more
than $300,000 and will be reimbursed for reasonable out-of-pocket expenses. It
is anticipated that approximately 150 persons will be employed by D.F. King to
solicit Stockholders. Purchaser will indemnify D.F. King against certain
liabilities and expenses in connection with the Consent Solicitation,
including liabilities under the federal securities laws.
Purchaser has retained Goldman, Sachs & Co. ("Goldman Sachs") and Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ") to act as its co-financial
advisors and as Co-Dealer Managers in connection with the Offer, for which
Goldman Sachs and DLJ will receive customary fees, as well as reimbursement of
reasonable out-of-pocket expenses. In addition, Purchaser has agreed to
indemnify Goldman Sachs and certain related persons and DLJ and certain
related persons against liabilities, including certain liabilities under the
federal securities laws, arising out of each of their engagements. Neither
Goldman Sachs nor DLJ admits that they or any of their respective partners,
directors, officers, employees, affiliates or controlling persons, if any, is
a "participant" as defined in Schedule 14A promulgated under the Exchange Act
in the solicitation of proxies and/or consents, or that Schedule 14A requires
the disclosure of certain information concerning Goldman Sachs or DLJ. In
connection with Goldman Sachs' role as co-financial advisor to Chesapeake and
Purchaser, the following investment banking employees of Goldman Sachs may
communicate in person, by telephone or otherwise with a limited number of
institutions, brokers or other persons who are stockholders of Shorewood and
may solicit proxies from these institutions, brokers or other persons: Ravi
Sinha, George Mattson, James Katzman, Peter Comisar and Jason Gilbert. In
connection with DLJ's role as co-financial advisor to Chesapeake and
Purchaser, the following investment banking employees of DLJ may communicate
in person, by telephone or otherwise with a limited number of institutions,
brokers or other persons who are stockholders of Shorewood and may solicit
proxies from these institutions, brokers or other persons: L. Price Blackford,
Doug Brown, Daniel Schleifman, Robert Simensky and Andrew Kramer. Goldman
Sachs and DLJ each engage in a full range of investment banking, securities
trading, market-making and brokerage services for institutional and individual
clients. In the normal course of its business Goldman Sachs and/or DLJ may
trade securities of Shorewood for each of their own accounts and the accounts
of their customers, and accordingly, may at any time hold a long or short
position in such securities. Goldman Sachs and DLJ has each informed
Chesapeake that, as of the date hereof, neither of them holds any Shares for
its own account. Goldman Sachs or DLJ and/or certain of their respective
affiliates may have voting and dispositive power with respect to certain
Shares held in asset management, brokerage and other accounts. Goldman Sachs,
DLJ, and each such of their respective affiliates disclaim beneficial
ownership of such Shares.
The expenses related directly to the Consent Solicitation are expected to
aggregate $ and will be borne by Chesapeake and Purchaser. These expenses
include any fees and expenses for attorneys, public relations and financial
advisers, solicitors, advertising, printing, transportation, litigation and
other costs incidental to the solicitation, but exclude costs represented by
salaries and wages of regular employees and officers of Chesapeake and
Purchaser and expenses related primarily to the Offer and the Proposed Merger.
Of the above stated amount, approximately $ has been spent to date.
Chesapeake and Purchaser do not intend to seek reimbursement of their
expenses related to the Consent Solicitation from Shorewood whether or not the
Consent Solicitation is successful.
If you have any questions concerning this Consent Solicitation or the
procedures to be followed to execute and deliver a consent, please contact
D.F. King & Co., Inc. at the telephone number specified below.
16
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Adoption of the Proposals, including the removal of the current members of
the Company Board and election of the Nominees, is an important step toward
prompt consummation of the Offer and the Proposed Merger. Accordingly,
Purchaser urges you to promptly sign, date and mail the enclosed WHITE consent
card.
You must separately tender your Shares pursuant to the Offer if you wish to
participate in the Offer. Executing a consent does not obligate you to tender
your Shares pursuant to the Offer, and your failure to execute a consent does
not prevent you from tendering your Shares pursuant to the Offer.
SHEFFIELD, INC.
December 3, 1999
IMPORTANT
Only Stockholders of record on the Record Date are entitled to give their
consent to the Proposals. Thus:
1. If your Shares are held in your own name, please sign, date and mail
the enclosed WHITE consent card in the postage-paid envelope provided.
2. If your Shares are held in the name of a brokerage firm, bank nominee
or other institution, only such entity can execute a consent on your behalf
and only upon receipt of your specific instructions. Accordingly, you
should sign, date and mail the enclosed WHITE consent card in the envelope
provided by your broker.
If you have any questions or require any assistance in executing your
consent, please call D.F. King & Co., Inc. at 1-800-578-5378 (toll-free).
Completed, signed and dated WHITE forms of consent should be mailed promptly
to Purchaser in care of Corporate Election Services, P.O. Box 1150,
Pittsburgh, Pennsylvania 15230. A postage paid envelope has been provided for
your convenience.
Purchaser requests that completed, signed and dated WHITE consent cards be
returned to it on or before its publicly announced target date of December ,
1999. A FAILURE TO SIGN AND RETURN THE WHITE CONSENT CARD IN A TIMELY MANNER
WILL HAVE THE SAME EFFECT AS A VOTE AGAINST PURCHASER'S PROPOSALS.
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SCHEDULE I
BACKGROUND OF THE OFFER
Between April 28, 1996, and October 26, 1999, Chesapeake had no contact with
the Company regarding any potential strategic transaction involving the
combination of the two companies. In the ordinary course of its business,
Chesapeake is engaged in the ongoing evaluation of potential candidates for
acquisitions and strategic transactions. As part of the development of
Chesapeake's strategy of divesting capital intensive, cyclical, commodity
businesses and focusing on value-added, specialty packaging businesses,
Chesapeake identified the Company as a potential acquisition target at least
as early as May 1998. In connection with the acquisition of Field Group plc
("Field Group") by Chesapeake in the first quarter of 1999, a preliminary
discussion with the Company took place centered on potential business
synergies between one or more Field Group plants and the Company. During two
meetings and a series of telephone calls during the summer of 1999,
representatives of Chesapeake and the Company discussed primarily
opportunities for alliances or transactions related to specific target markets
or individual plants. In their meetings and phone calls during the summer of
1999, representatives of Chesapeake and the Company did not discuss
opportunities for a business combination or potential strategic transaction
involving the companies. These discussions did not result in any negotiations
or proposals concerning a business combination.
On October 26, 1999, Mr. Marc P. Shore, Chairman of the Board & Chief
Executive Officer of the Company ("Mr. Shore"), called Mr. Thomas H. Johnson,
President & Chief Executive Officer of Chesapeake ("Mr. Johnson"), to discuss
the following letter which Mr. Johnson received on October 27, 1999:
October 26, 1999
STRICTLY CONFIDENTIAL
The Board of Directors
Chesapeake Corporation
1021 East Cary Street
Richmond, VA 23218
ATTENTION: Mr. Thomas H. Johnson, Chief Executive Officer
Dear Tom:
As you know, you and I have had a number of discussions regarding various
business arrangements between Shorewood and Chesapeake. I believe it is in
both of our companies' and their respective shareholders' best interest to
move these discussions forward. The purpose of this letter is to propose that
Shorewood acquire Chesapeake at a substantial premium to your current market
value. Shorewood's Board of Directors met today and has authorized transmittal
of this proposal to you and your Board.
Tom, I believe our proposal is a compelling one and would be very exciting for
Chesapeake's shareholders, employees, management and customers. We are in a
position to make a proposal to acquire Chesapeake at $40 per share in cash
which represents a 41% premium to yesterday's closing price and a 38% premium
to the 20-day average closing price. This proposal reflects the input of our
senior management team, many of whom were part of the Shorewood due diligence
team that reviewed our potential acquisition of Field, and it also reflects a
thorough review of all publicly available information.
We have met with our financial advisors and financing sources and believe that
financing does not present an issue in this transaction. It would be our
expectation that the Board of Directors of Chesapeake would meet to review
this letter as soon as possible and authorize exclusive discussions with us.
At such time we would be prepared to discuss our financing plan for the
transaction with you (and would anticipate that our ultimate agreement to
acquire Chesapeake would not be subject to any type of financing condition).
Further, we do not believe that any significant obstacles such as anti-trust
or other conditions exist.
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We are sensitive to the inherent difficulties faced by you in negotiating this
type of transaction in a public forum and are prepared to negotiate
confidentiality with you provided that you are prepared to begin these
negotiations in an exclusive and expedient fashion intended to result in a
transaction with Shorewood.
We feel that our proposal represents a significant immediate cash premium to
Chesapeake shareholders and represents a price that we believe your Board and
stockholders should enthusiastically support. We urge you and your fellow
directors to give serious consideration to the merits of this transaction and
reiterate our willingness to work with you in an expedient and confidential
manner intended to serve the interests of the shareholders of Chesapeake
Corporation.
I look forward to your response to this proposal and look forward to working
with all of you in achieving this major event for both of our companies and
their respective shareholders.
Sincerely,
SHOREWOOD PACKAGING CORPORATION
/s/ Marc P. Shore
Marc P. Shore
Chairman of the Board
During the telephone call on October 26, 1999, Mr. Johnson stated that
Chesapeake was not for sale, but that the Chesapeake Board would consider the
proposal included in Mr. Shore's letter (the "Shorewood Proposal").
On October 29, 1999, Mr. Johnson delivered the following letter to Mr. Shore
by facsimile:
October 29, 1999
Strictly Confidential
Mr. Marc P. Shore
Chairman of the Board & Chief Executive Officer
Shorewood Packaging Corporation
277 Park Avenue
New York, New York 10172
Dear Marc:
I have received your letter of October 26, 1999.
As you know, Chesapeake is not for sale. We are in the process of executing
our strategy of building a global specialty packaging and merchandising
company, which we believe is in the best interests of Chesapeake and its
shareholders.
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However, our Board of Directors, consistent with its fiduciary duties, will
consider carefully your letter. Completion of the appropriate analysis to give
due consideration to your letter and enable our Board to become fully informed
will require some time. I will respond to your letter no later than one week
from today, or Friday, November 5, 1999.
Sincerely,
/s/ Thomas H. Johnson
Thomas H. Johnson
President & Chief Executive Officer
On November 3, 1999, the Chesapeake Board convened a special meeting to
discuss the Shorewood Proposal. The Chesapeake Board received presentations
from Chesapeake's management regarding Chesapeake's performance and the
Shorewood Proposal. The Chesapeake Board also received advice from its legal
counsel and from Goldman Sachs and DLJ, co-financial advisors to the Chesapeake
Board. Having received, considered and discussed such presentations and advice,
the Chesapeake Board unanimously determined, at the November 3, 1999 meeting,
that the Shorewood Proposal was inadequate and not in the best interests of
Chesapeake and its shareholders. The Chesapeake Board authorized and directed
Mr. Johnson to inform the Company that the Chesapeake Board had rejected the
Shorewood Proposal.
The Chesapeake Board then reviewed its recent discussions with respect to
various strategic alternatives and business development opportunities it had
been considering as part of its ongoing strategy of building a global specialty
packaging and merchandising company, including a possible acquisition of the
Company. Among other things, the Chesapeake Board noted that such an
acquisition was consistent with Chesapeake's strategic plan. The Chesapeake
Board further considered that Chesapeake could unlock significant value in the
Company's assets by applying Chesapeake's management and operational strategies
and by incorporating an acquisition of the Company into other potential
acquisitions being explored by Chesapeake. At the conclusion of the November 3,
1999 meeting, the Chesapeake Board authorized Mr. Johnson to propose to Mr.
Shore that Chesapeake acquire the Company.
On November 4, 1999, Mr. Johnson called Mr. Shore to suggest a meeting. At
the meeting, on November 10, 1999, Mr. Johnson (i) advised Mr. Shore that
Chesapeake was not for sale and that, after careful review, the Chesapeake
Board had unanimously determined that the Shorewood Proposal was inadequate and
not in the best interests of Chesapeake and its shareholders and (ii) proposed
that Chesapeake acquire the Company at a price of $16.50 per share in cash.
While Mr. Shore stated that he would communicate the offer to the Company
Board, he indicated that a meeting of the Company Board to consider such an
offer would be a "very short one."
Later on November 10, 1999, Mr. Johnson delivered the following letter to Mr.
Shore reiterating that Chesapeake was not for sale and that, after careful
review, the Chesapeake Board had unanimously determined that the Shorewood
Proposal was inadequate and not in the best interests of Chesapeake and its
shareholders. The letter also confirmed Chesapeake's proposal to acquire the
Company and set forth the merits of the proposed acquisition and indicated
Chesapeake's desire to enter into a negotiated transaction.
I-3
<PAGE>
November 10, 1999
Strictly Confidential
Mr. Marc P. Shore
Chairman of the Board & Chief Executive Officer
Shorewood Packaging Corporation
277 Park Avenue
New York, New York 10172
Dear Marc:
This letter follows our meeting today to discuss your letter, dated October
26, 1999, in which you suggest a combination between Shorewood Packaging
Corporation and Chesapeake Corporation. Our Board of Directors, in consultation
with our management, legal, and financial advisors, has reviewed thoroughly
your expression of interest and related relevant considerations.
As I advised you today, our Board of Directors, after careful review, has
unanimously determined that the acquisition of Chesapeake by Shorewood, as set
forth in your letter, is not in the best interests of Chesapeake and its
shareholders and has charged me with firmly and unambiguously rejecting your
proposal. Our Board of Directors' firm conviction is that the interests of
Chesapeake and its shareholders are best served by continuing to pursue
vigorously our current strategic plan as an independent company.
While we believe that your proposal is not in the best interests of our
shareholders, our analysis suggests that a combination of our businesses
through an acquisition of Shorewood by Chesapeake would be in the best
interests of our respective shareholders, employees, and customers. Towards
that end, Chesapeake's Board of Directors has unanimously authorized me to
propose that Chesapeake acquire Shorewood at $16.50 in cash per share,
representing nearly a 40% premium over Shorewood's closing price yesterday. The
transaction we propose can be effected by Chesapeake immediately with its cash
on hand and committed credit facilities, and is, therefore, not subject to a
financing condition.
Chesapeake has been evaluating a possible acquisition of Shorewood since
early 1998, as part of our ongoing strategy of building a global specialty
packaging and merchandising company. We believe that the combination of
Chesapeake and Shorewood would create one of the world's premier specialty
packaging and merchandising companies, enhancing Chesapeake's position as a
leader in this segment and benefiting our customers through one-stop-shopping
for complementary products.
We are prepared to commence immediately good faith negotiations on an
exclusive basis with the objective of entering into a definitive merger
agreement consistent with our proposal. To date, your letter to us has been
kept confidential, and we have reciprocally made our proposal to you on a
confidential basis. Should you choose to pursue this matter in the public
forum, be assured that we are prepared to pursue aggressively our own
objectives.
We appreciate the obligation of your Board of Directors, which you
acknowledged today, to meet and consider our proposal from the standpoint of
the best interests of all of your shareholders. Of course, we were disappointed
that you stated today that such a meeting would be a very short one.
Nevertheless, we hope that your Board will give our proposal serious
consideration.
I look forward to your prompt response.
Sincerely,
/s/ Thomas H. Johnson
Thomas H. Johnson
President & Chief Executive Officer
I-4
<PAGE>
On November 18, 1999, Mr. Shore delivered the following letter to Mr. Johnson
by facsimile:
November 18, 1999
Mr. Thomas H. Johnson
President & Chief Executive Officer
Chesapeake Corporation
James Center II
1021 East Cary Street
Box 2350
Richmond, VA 23218
Dear Tom:
This is in response to the proposal you made at our meeting on November 10,
1999 and in the letter you delivered to me late the same day.
Our Board of Directors has given due consideration to your proposal and
concluded that it is inconsistent with Shorewood's clear and successfully
implemented strategic direction and not in the best interests of Shorewood's
stockholders. After consulting with our legal and financial advisors, our Board
has determined that our stockholders will benefit most if Shorewood continues
to position itself as the premier supplier of high end folding cartons to a
multinational customer base. Accordingly, I have been authorized to inform you
that the Shorewood Board of Directors has unanimously and unequivocally
rejected your proposal that we enter into negotiations for the acquisition of
Shorewood by Chesapeake.
Nevertheless, we continue to believe that an acquisition of Chesapeake by
Shorewood, at a fair price and a significant premium to Chesapeake's current
market value would be a step in the best interests of Chesapeake's
stockholders, management, employees and customers. Moreover, we believe that
the price of $40 per share, which we have proposed, would be embraced by
Chesapeake's stockholders. That price would enable Chesapeake's stockholders to
realize a valuation nearly equivalent to their company's all time market high
and more than 30% above its current market value.
Tom, we want to enter into an amicable, albeit arm's length, negotiated
transaction with your company. Toward that end, we again propose that your
Board authorize you to enter into negotiations with us, so that your
stockholders may decide whether the proposal we have made is fair, reasonable
and in their best interests. We believe, without having had an opportunity to
do any due diligence other than with respect to publicly available documents,
that $40 fully values Chesapeake's stock. I trust you will reconsider your
position and respond so that we may further our mutual interests.
Alternatively, we are willing to let Chesapeake's stockholders decide if our
proposal is acceptable to them, whether or not your Board endorses the
proposal. Therefore, if you and your Board are unwilling to enter into
negotiations with us, we request that you remove the existing legal impediments
to a Shorewood tender offer so that your stockholders may decide for themselves
where their best interests lie.
As you know, Shorewood has a shareholding in Chesapeake which, based on your
most recent published information, is almost 5% of Chesapeake's outstanding
common stock. If you make continued progress in your share repurchase program,
Shorewood will become a 5% shareholder in your company, even if it does not
increase its position. In any event, we believe it appropriate that
Chesapeake's stockholders be made aware of the opportunity that Shorewood is
seeking to provide and that they, as well as Shorewood's stockholders, be
informed of your response to our proposal. To accomplish that, we are issuing
the enclosed press release simultaneously with the delivery of this letter.
Cordially,
/s/ Marc P. Shore
Marc P. Shore
Chairman and Chief Executive Officer
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<PAGE>
Also on November 18, 1999, the Company issued the following press release:
CONTACTS:
Shorewood Packaging
Howard Liebman
President & Chief Financial
Officer
(212) 371-1500
FOR IMMEDIATE RELEASE
Morgan-Walke Associates
Investors: Robert P.
Jones/Stephanie Prince
Media: Jennifer Kirksey
(212) 850-5600
SHOREWOOD PACKAGING CORPORATION PROPOSAL
TO CHESAPEAKE CORPORATION
NEW YORK, NY, November 18, 1999--Shorewood Packaging Corporation (NYSE:SWD)
announced that Chesapeake Corporation's (NYSE:CSK) Board of Directors has
rejected a proposal by Shorewood to enter into negotiations for the acquisition
of Chesapeake with cash consideration of $40 per share, a premium of 41% over
the market price when the proposal was made, 33% over yesterday's closing price
and a valuation nearly equivalent to Chesapeake's all time market high, reached
in July 1998, well before it announced its current stock buy-back program.
Shorewood stated that its proposal had been made to Chesapeake's Board of
Directors on October 26, 1999 and rejected by Chesapeake on November 10, 1999.
Chesapeake's rejection included a counterproposal that Chesapeake acquire
Shorewood for cash consideration of $16.50 a share, a price well below
Shorewood's trailing 12 month closing high. Shorewood's Board of Directors has
rejected the counterproposal as being inconsistent with the company's strategic
plan to position itself as the premier supplier of high end folding cartons to
a multinational customer base, as well as failing to recognize Shorewood's
value and the benefits that would be provided to Chesapeake's customers,
employees and stockholders if Shorewood were to acquire Chesapeake.
Shorewood owned 809,000 Chesapeake shares or 4.62% of Chesapeake as of
October 29, 1999, the date of Chesapeake's most recent 10-Q. Shorewood noted
that Chesapeake's anti-takeover provisions have the practical effect of
disenfranchising Chesapeake's shareholders. For example, Chesapeake's "dead
hand poison pill" makes it difficult for Shorewood to present its proposal to
Chesapeake's shareholders without the prior approval of Chesapeake's Board of
Directors. Accordingly, Shorewood stated, although it is not currently
contemplating a tender offer to Chesapeake's shareholders without the prior
approval of Chesapeake's Board of Directors, it has requested Chesapeake's
Board to redeem the "poison pill". If the "poison pill" and other protective
provisions were removed, Shorewood would move promptly to bring its proposal
directly to Chesapeake's stockholders. Additionally, together with its
financial and legal advisors, Shorewood is considering other alternatives that
would enable Chesapeake's stockholders to decide whether $40 a share is a fair
price.
Shorewood Packaging Corporation is a leading value-added provider of high
quality printing and paperboard packaging for the computer software, cosmetics
and toiletries, food, home video, music, tobacco and general consumer markets
in North America and China, with 16 plants in the United States, Canada and
China.
Certain statements included in this press release constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements are typically identified by their inclusions of
phrases such as "the Company anticipates," "the Company believes" and other
phrases of similar
I-6
<PAGE>
meaning. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors that may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such factors include, among others: general economic and
business conditions; competition; political changes in international markets;
raw material and other operating costs; costs of capital equipment; changes in
foreign currency exchange rates; changes in business strategy or expansion
plans; the results of continuing environmental compliance testing and
monitoring; quality of management; availability, terms and development of
capital; fluctuating interest rates and other factors referenced in this
release and in the Company's annual report on Form 10-K and quarterly reports
on Form 10-Q.
Also on November 18, 1999, Chesapeake issued the following press release:
Chesapeake Confirms Proposal to Acquire Shorewood for $16.50 Per Share in Cash
RICHMOND, Va., Nov. 18/PRNewswire/--Chesapeake Corporation (NYSE: CSK - news)
today confirmed that it made a proposal to acquire Shorewood Packaging
Corporation (NYSE: SWD - news) for $16.50 in cash per share, or in the
aggregate, approximately $480 million in equity plus approximately $260 million
in debt. This represents nearly a 40% premium over Shorewood's closing price on
November 9, 1999, the day prior to Chesapeake's proposal. The transaction can
be effected by Chesapeake immediately with its cash on hand and committed
credit facilities, and is not subject to a financing condition.
Chesapeake noted that the company is prepared to commence immediate good faith
negotiations on an exclusive basis with the objective of entering into a
definitive merger agreement consistent with its proposal.
Thomas H. Johnson, president and chief executive officer of Chesapeake, said,
"Chesapeake has been evaluating a possible acquisition of Shorewood since early
1998, as part of our ongoing strategy of building a global specialty packaging
and merchandising company. We believe Chesapeake's acquisition of Shorewood
would create, under Chesapeake's leadership, one of the world's premier
specialty packaging and merchandising companies, enhancing Chesapeake's
position as a leader in this segment and benefiting customers through one-stop
shopping for complementary products.
"We at Chesapeake are continuing to pursue our strategic plan of redeploying
our capital into appropriate acquisitions to further our growth and enhance
shareholder value. We are currently in discussions with several other
attractive acquisition candidates," Mr. Johnson continued.
"We believe that Shorewood's decision to make public its unsolicited proposal
is the latest in a series of ill-conceived actions by Shorewood following
Shorewood's unsuccessful attempt to acquire Field Group plc, which Chesapeake
acquired in March 1999," concluded Mr. Johnson.
Chesapeake noted that its board of directors, in consultation with its
financial advisors, Goldman, Sachs & Co. and Donaldson Lufkin & Jenrette, and
legal advisor, Hunton & Williams, carefully considered Shorewood's unsolicited
proposal and unanimously concluded that the proposal is inadequate and not in
the best interests of Chesapeake's shareholders.
Chesapeake also noted that it has referred Shorewood's heretofore-undisclosed
accumulation of Chesapeake stock to the Federal Trade Commission, requesting an
investigation as to whether Shorewood has violated the Hart-Scott-Rodino
Antitrust Improvement Act.
Chesapeake Corporation, headquartered in Richmond, Va., is primarily engaged in
the manufacturing and sale of specialty packaging and point-of-purchase
displays. Chesapeake has over 40 locations in North America, Europe and Asia.
Chesapeake's net sales in 1998 were $950.4 million. Chesapeake's website is
http://www.cskcorp.com.
This news release, including comments by Thomas H. Johnson, contains forward-
looking statements that are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. The
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<PAGE>
accuracy of such statements is subject to a number of risks, uncertainties, and
assumptions that may cause Chesapeake's actual results to differ materially
from those expressed in the forward-looking statements including, but not
limited to: competitive products and pricing; production costs, particularly
for raw materials such as corrugated box and display materials; fluctuations in
demand; government policies and regulations affecting the environment; interest
rates; currency translation movements; Year 2000 compliance issues; and other
risks that are detailed from time to time in reports filed by the Company with
the Securities and Exchange Commission.
On November 22, 1999, Mr. Johnson sent the following letter to each of the
directors of the Company Board:
November 22, 1999
The Board of Directors
Shorewood Packaging Corporation
277 Park Avenue
New York, NY 10172
Ladies and Gentlemen:
We were disappointed to learn of your rejection of our fully-financed proposal
to acquire Shorewood at $16.50 per share, representing a substantial premium to
your current market price. We continue to believe that a combination of our
businesses under Chesapeake's leadership would be in the best interests of our
respective shareholders, employees and customers.
Your President, Mr. Liebman, was quoted in The Wall Street Journal as saying
that you are prepared to consider an offer at the "right price." While we
believe that our $16.50 proposal represents a full valuation, we wish to
reiterate that we are prepared to commence immediate good faith negotiations
regarding our proposal. Our offer is based on publicly available information,
and we remain open to the possibility that we may be able to increase our offer
with appropriate due diligence and access to your business plan. We also stand
ready to discuss alternatives to an all-cash structure that may offer a tax-
advantaged alternative for your shareholders.
Given the importance to your stockholders of our continued interest and our
willingness to negotiate price and structure, we are issuing a press release
today concerning the subject of this letter.
We look forward to your prompt response, and to commencing good faith
negotiations regarding our proposal.
Sincerely,
/s/ Thomas H. Johnson
Thomas H. Johnson
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Also on November 22, 1999, Chesapeake issued the following press release:
FOR IMMEDIATE RELEASE
CHESAPEAKE SENDS LETTER TO SHOREWOOD DIRECTORS
Indicates Willingness to Negotiate Price and Structure
(Richmond, VA--November 22, 1999) Thomas H. Johnson, President and CEO of
Chesapeake Corporation (NYSE:CSK), today sent the following letter to each of
the directors of Shorewood Packaging Corporation (NYSE:SWD) regarding
Chesapeake's proposal to acquire Shorewood for $16.50 per share in cash:
November 22, 1999
The Board of Directors
Shorewood Packaging Corporation
277 Park Avenue
New York NY 10172
Ladies and Gentlemen:
We were disappointed to learn of your rejection of our fully-financed proposal
to acquire Shorewood at $16.50 per share, representing a substantial premium to
your current market price. We continue to believe that a combination of our
businesses under Chesapeake's leadership would be in the best interests of our
respective shareholders, employees and customers.
Your President, Mr. Liebman, was quoted in The Wall Street Journal as saying
that you are prepared to consider an offer at the "right price." While we
believe that our $16.50 proposal represents a full valuation, we wish to
reiterate that we are prepared to commence immediate good faith negotiations
regarding our proposal. Our offer is based on publicly available information,
and we remain open to the possibility that we may be able to increase our offer
with appropriate due diligence and access to your business plan. We also stand
ready to discuss alternatives to an all-cash structure that may offer a tax-
advantaged alternative for your shareholders.
Given the importance to your stockholders of our continued interest and our
willingness to negotiate price and structure, we are issuing a press release
today concerning the subject of this letter.
We look forward to your prompt response, and to commencing good faith
negotiations regarding our proposal.
Sincerely,
/s/ Thomas H. Johnson
Thomas H. Johnson
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Johnson commented that he hoped Shorewood's board, upon receiving the letter,
would realize the promising opportunities that could be created through a
combination of the companies under Chesapeake's leadership. "Under our
proposal, the combined company would have a strong balance sheet with
financial and management capabilities to compete and grow globally. Chesapeake
has a proven track record as a global consolidator with successful integration
of acquired businesses."
Johnson continued, "Chesapeake Corporations's international strength is
important, because we believe that global consolidation to offer multinational
customers one-stop business solutions will drive our business in the next
century. Chesapeake has an experienced international management team in place
to operate a global packaging and merchandising company."
Johnson also cited Chesapeake's multiple leadership positions in specialty
packaging and merchandising. "Chesapeake is the largest North American
producer of temporary and permanent point-of-purchase displays, the North
American leader for colorful, litho-laminated packaging, a leading European
folding carton, leaflet and label supplier, and a local leader in specific
U.S. markets for customized, corrugated packaging. Our net sales for 1998 were
$950.4 million and our net sales for 1999's first three quarters, ending
September 30, are $916.8 million. We are clearly in a strong position to make
the combination of our two businesses successful."
Chesapeake Corporation, headquartered in Richmond, Va., is primarily engaged
in the manufacturing and sale of a specialty packaging and point-of-purchase
displays. Chesapeake has over 40 locations in North America, Europe and Asia.
Chesapeake's net sales in 1998 were $950.4 million. Chesapeake's website is
www.cskcorp.com.
###
This news release, including comments by Thomas H. Johnson, contains forward-
looking statements that are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. The accuracy of such
statements is subject to a number of risks, uncertainties, and assumptions
that may cause Chesapeake's actual results to differ materially from those
expressed in the forward-looking statements including, but not limited to:
competitive products and pricing; production costs, particularly for raw
materials such as corrugated box and display materials; fluctuations in
demand; government policies and regulations affecting the environment;
interest rates; currency translation movements; Year 2000 compliance issues;
and other risks that are detailed from time to time in reports filed by the
Company with the Securities and Exchange Commission.
For media relations, call: For investor relations,
Molly Remes call:
804-697-1110 William Tolley/Joel
Mostrom
804-697-1157/804-697-
1147
Joele Frank or Andy Brimmer
Abernathy MacGregor Frank
212-371-5999
On November 26, 1999, Chesapeake entered into the Purchase Agreement with
Ariel pursuant to which Ariel agreed to use its best efforts as investment
adviser to exercise its discretionary authority to cause Ariel's clients to
sell 4,106,440 Shares, or approximately 14.9% of the Company's outstanding
Shares, to Chesapeake at a purchase price of $17.25 per share. Ariel also
agreed that, if Chesapeake commenced a public tender offer for Shares at a
price that equaled or exceeded $17.25 per share, then Ariel would use its best
efforts as investment adviser to exercise its discretionary authority to cause
Ariel's clients to tender such Shares in such tender offer and would execute
any proxies or written consents in the form solicited by Chesapeake in any
proxy or written consent solicitation commenced in connection with such tender
offer. See Schedule III hereto.
I-10
<PAGE>
On November 29, 1999, Chesapeake issued the following press release:
Chesapeake Corporation
FOR IMMEDIATE RELEASE
CHESAPEAKE CORPORATION AGREES TO ACQUIRE 14.9% OF
SHOREWOOD PACKAGING SHARES
(Richmond, VA--November 29, 1999) Chesapeake Corporation (NYSE:CSK) today
announced that it has agreed to purchase approximately 4.1 million shares, or
14.9%, of Shorewood Packaging Corporation's (NYSE:SWD) outstanding common stock
from an institutional investor at a price of $17.25 per share. Chesapeake
previously announced that it has made a fully financed proposal to Shorewood's
directors to purchase Shorewood's shares at $16.50 per share, nearly a 40%
premium over Shorewood's closing price on November 9, 1999, the day before
Chesapeake's proposal was presented to Shorewood.
Thomas H. Johnson, president and chief executive officer of Chesapeake, said,
"We are pleased with this agreement, which validates our view that Chesapeake's
acquisition of Shorewood makes great sense for Shorewood's shareholders. We
believe Chesapeake's acquisition of Shorewood would create, under Chesapeake's
leadership, one of the world's premier specialty packaging and merchandising
companies, enhancing Chesapeake's position as a leader in this segment and
benefiting customers through one-stop shopping for complementary products.
"Chesapeake has a strong balance sheet with the management and financial
capabilities to compete and grow globally. Chesapeake also has a proven track
record as a global consolidator with successful integration of acquired
businesses. We renew our offer to Shorewood's directors to meet and negotiate
the terms of an acquisition of Shorewood by Chesapeake."
Closing of the purchase of the Shorewood shares is subject to completion of
review of the transaction under the Hart-Scott-Rodino Antitrust Improvements
Act. Chesapeake will commence the time period of review by a filing to be made
today. Additional information will be set forth in a Schedule 13D expected to
be filed with the Securities and Exchange Commission today. Information in this
release is qualified by reference to the information to be included in the
Schedule 13D.
Chesapeake is the largest North American producer of temporary and permanent
point-of-purchase displays, the North American leader for colorful, litho-
laminated packaging, the premiere European folding carton, leaflet and label
supplier, and a local leader in specific U.S. markets for customized,
corrugated packaging.
Chesapeake Corporation, headquartered in Richmond, Va., is primarily engaged in
the manufacturing and sale of specialty packaging and merchandising services.
Chesapeake has over 40 locations in North America, Europe and Asia.
Chesapeake's net sales in 1998 were $950.4 million. Chesapeake's website is
www.cskcorp.com.
###
This news release, including comments by Thomas H. Johnson, contains forward-
looking statements that are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. The accuracy of such
statements is subject to a number of risks, uncertainties, and assumptions that
may cause Chesapeake's actual results to differ materially from those expressed
in the forward-looking statements including, but not limited to: competitive
products and pricing; production costs, particularly for raw materials such as
corrugated box and display materials; fluctuations in demand; government
policies and regulations affecting the
I-11
<PAGE>
environment; interest rates; currency translation movements; Year 2000
compliance issues; and other risks that are detailed from time to time in
reports filed by the Company with the Securities and Exchange Commission.
For media relations, call: For investor relations,
Molly Remes call:
804-697-1110 William Tolley/Joel
Mostrom
804-697-1157/804-697-
1147
Joele Frank or Andy Brimmer
Abernathy MacGregor Frank
212-371-5999
Also on November 29, 1999, the Company issued the following press release:
SHOREWOOD PACKAGING CORPORATION ISSUES STATEMENT
NEW YORK, Nov. 29 /PRNewswire/ -- Shorewood Packaging Corporation (NYSE: SWD --
news) remains committed to its $40 per share cash proposal to acquire
Chesapeake. Given the unwillingness of Chesapeake's management and Board of
Directors to consider Shorewood's proposal, Shorewood is continuing to explore
options to enable Chesapeake's shareholders to consider the Shorewood proposal.
Shorewood's proposal of $40 per share is significantly above the consensus one
year price target for Chesapeake and also represents a 52-week high for the
company.
Shorewood reiterated that it is not for sale and believes Chesapeake's actions
to date are solely in response to the Shorewood premium cash proposal.
Shorewood also believes that Chesapeake's actions reflect a reckless disregard
for the best interests of their shareholders and do not reflect a careful
evaluation of Shorewood or its business. Shorewood noted that it views
Chesapeake's proposal to acquire Shorewood for $16.50 per share as grossly
inadequate. That price is considerably below Shorewood's 52-week high and
vastly below analysts' one-year price target for Shorewood, which range as high
as $25 per share.
Finally, Shorewood noted that an institutional investor has agreed to sell
14.9% of Shorewood to Chesapeake for $17.25 per share. In a call to Shorewood,
that investor informed Shorewood that its required regulatory filing will
disclose that the institution, which invested in Shorewood at a low-cost basis,
retains 100% of the upside with respect to those shares in the event of a sale
to Chesapeake at a higher price. Given the terms of this arrangement, Shorewood
does not believe the price to be paid by Chesapeake reflects fair value for
Shorewood, and believes its own $40 per share offer for Chesapeake to represent
superior value.
Shorewood Packaging Corporation is a leading value-added provider of high
quality printing and paperboard packaging for the computer software, cosmetics
and toiletries, food, home video, music, tobacco and general consumer markets
in North America and China, with 16 plants in the United States, Canada and
China.
Certain statements included in this press release constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements are typically identified by their inclusion of
phrases such as "the Company anticipates," "the Company believes" and other
phrases of similar meaning. Such forward-looking statements involve known and
unknown risks, uncertainties and other factors that may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others: general
economic and business conditions; competition; political changes in
international markets; raw material and other operating costs; costs of capital
equipment; changes in foreign currency exchange rates; changes in business
strategy or expansion plans; the results of continuing environmental compliance
testing and monitoring; quality of management; availability, terms and
development of capital; fluctuating interest rates and other factors referenced
in this release and in the Company's annual report on Form 10-K and quarterly
reports on Form 10-Q.
I-12
<PAGE>
On November 30, 1999, Chesapeake filed a Schedule 13D with the SEC
disclosing that Chesapeake had entered into an agreement to purchase 4,106,440
Shares, or approximately 14.9% of the Company's outstanding Shares, from the
clients of Ariel Capital Management, Inc. for $17.25 per Share.
On December 2, 1999, the Company filed a Current Report on Form 8-K with the
SEC disclosing the adoption of the Bylaw Amendments.
On December 3, 1999, Chesapeake and Purchaser commenced the Offer.
On December 3, 1999, Chesapeake and Purchaser filed preliminary materials
with the SEC to solicit consents from the Stockholders of the Company in
connection with this Consent Solicitation.
On December 3, 1999, Chesapeake and Purchaser commenced a lawsuit in the
Court of Chancery of the State of Delaware against the Company and the Company
Board seeking, among other things, an order (i) declaring that the Company
Board breached its fiduciary duties by adopting the Bylaw Amendments (ii)
declaring the Super Majority Bylaw and the Consent Record Date Bylaw void, and
enjoining the Company Board from implementing the Super Majority Bylaw, the
Consent Record Date Bylaw and the Bylaw Amendments as a whole, (iii) declaring
that failure to redeem the Rights or to render the Rights inapplicable to the
Offer and the Proposed Merger or to approve the Offer and the Proposed Merger
would constitute a breach of the Company Board's fiduciary duties under
Delaware law, (iv) invalidating the Rights or compelling the Company Board to
redeem the Rights or render the Rights inapplicable to the Offer and the
Proposed Merger, (v) declaring that failure to approve the Offer and the
Proposed Merger for purposes of Section 203 of the DGCL would constitute a
breach of the Company Board's fiduciary duties under Delaware law, (vi)
compelling the Company Board to approve the Offer and the Proposed Merger for
purposes of Section 203 of the DGCL, (vii) enjoining the Company Board from
taking any actions designed to impede or which have the effect of impeding the
Offer, the Consent Solicitation or the Proposed Merger and declaring that any
such actions would constitute a breach of the Company Board's fiduciary duties
under Delaware law, and (viii) enjoining the Company Board from taking any
actions to impede, or refuse to recognize the validity of, the Consent
Solicitation.
Also on December 3, 1999, Chesapeake and Purchaser commenced litigation
against the Company in the United States District Court for the District of
Delaware seeking, among other things, a declaratory judgment that Chesapeake
and Purchaser have disclosed all information required by, and are otherwise in
full compliance with, the Exchange Act and any other federal securities laws,
rules or regulations deemed applicable to the Offer and the Consent
Solicitation.
I-13
<PAGE>
SCHEDULE II
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE
OFFICERS, AND CERTAIN REPRESENTATIVES, OF CHESAPEAKE AND PURCHASER
The following tables set forth the name and the present principal occupation
or employment, and the name, principal business and address of any corporation
or other organization in which such employment is carried on, of (1) the
Directors and executive officers of Chesapeake, (2) the Directors and
executive officers of Purchaser and (3) certain representatives of Chesapeake
who may assist D.F. King & Co., Inc., the Information Agent, in soliciting
proxies from Shorewood Stockholders. Unless otherwise indicated, the principal
business address of each Director or executive officer of Chesapeake, and each
Director or executive officer of Purchaser, named below is 1021 East Cary
Street, Richmond, Virginia 23218-2350.
Directors and Executive Officers of Chesapeake
<TABLE>
<CAPTION>
Name and Principal Present Office and
Business Address Principal Occupation or Employment During the Last Five Years
------------------ -------------------------------------------------------------
<C> <S>
Robert L. Hintz Director; Chairman of the Board, R.L. Hintz and Associates, a
management services consulting firm (since 1988); Director of
Arch Coal, Inc., Reynolds Metals Company and Scott &
Stringfellow Financial, Inc.
Thomas H. Johnson Director; President & Chief Executive Officer of Chesapeake
Corporation (since 1997); former Vice Chairman (1996-1997) and
President and Chief Executive Officer (1989-1996), Riverwood
International Corporation, a forest products and packaging
company.
James E. Rogers Director; President, SCI Investors, Inc., a private equity
investment firm (since 1993); Director of Owens & Minor, Inc.,
Caraustar Industries, Inc. and Wellman, Inc.
John W. Rosenblum Director; Dean, Jepson School of Leadership Studies, University
of Richmond (since 1996); former Tayloe Murphy Professor of
Business Administration (1993-1996), Darden Graduate School of
Business Administration, University of Virginia; Director of
Cadmus Communications Corporation, Comdial Corporation, Cone
Mills Corporation and Grantham, Mayo, van Otterloo, LLP.
Frank S. Royal Director; Physician (since 1969); Director of Columbia/HCA
Healthcare Corporation, CSX Corporation, Dominion Resources,
Inc. and SunTrust Banks, Inc.
Wallace Stettinius Director; Retired (since 1995); former Chairman of the Board,
Cadmus Communications Corporation, a graphic communications
holding company; Director of Cadmus Communications Corporation.
Richard G. Tilghman Director; Chairman of the Board, Chief Executive Officer and
Director, Crestar Financial Corporation, a bank holding company
(since 1985); Vice Chairman of the Board, Executive Vice
President and Director, SunTrust Banks, Inc., a bank holding
company.
Joseph P. Viviano Director; Vice Chairman (since 1999) and Director, Hershey
Foods Corporation, a manufacturer of confectionery products;
former President and Chief Operating Officer (1993-1998),
Hershey Foods Corporation; Director of Harsco Corporation,
Huffy Corporation and R.J. Reynolds Tobacco Holdings, Inc.
Harry H. Warner Director; Chairman of the Board (Non-executive) of Chesapeake
Corporation (since 1998); Financial Consultant; Director of
Allied Research Corporation and Pulaski Furniture Corporation.
Hugh V. White, Jr. Director; Senior Counsel, Hunton & Williams, Chesapeake
Corporation's principal law firm (since 1999); Partner, Hunton
& Williams (1969-1999); Director of Pulaski Furniture
Corporation.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
Name and Principal Present Office and
Business Address Principal Occupation or Employment During the Last Five Years
------------------ -------------------------------------------------------------
<C> <S>
J.P. Causey Jr. Senior Vice President, Secretary & General Counsel (since 1995);
Vice President, Secretary & General Counsel (1986-1995);
Director of C&F Financial Corporation.
Keith Gilchrist Executive Vice President--European Packaging (since 1999); Chief
Executive, Field Group plc (since 1993).
Andrew J. Kohut Senior Vice President, Strategic Business Development (since
1998); Group Vice President--Display and Packaging (1996-1998);
Group Vice President--Finance & Strategic Development and Chief
Financial Officer (1995-1996); Vice President--Finance and Chief
Financial Officer (1991-1995).
Octavio Orta Executive Vice President--Display & Packaging (since 1998);
Senior Vice President, Coated Board Sales and Packaging
Operation Group, Riverwood International Corporation (1995-
1998); Senior Vice President Europe and Asia/Pacific, Riverwood
International Corporation (1993-1995).
Robert F. Schick Senior Vice President--containers (since 1998); President,
Chesapeake Packaging Co. (since 1996); Vice President,
Chesapeake Packaging Co. (1994-1996).
Thomas A. Smith Vice President--Human Resources & Assistant Secretary (since
1987).
William T. Tolley Senior Vice President--Finance and Chief Financial Officer
(since 1998); Group Vice President--Finance and Chief Financial
Officer (1996-1998); Vice President, Finance and Logistics,
Chief Financial Officer, North American Operations, Carrier
Corporation (1994-1996).
</TABLE>
II-2
<PAGE>
Directors and Executive Officers of Purchaser
<TABLE>
<CAPTION>
Name and Principal Present Office and
Business Address Principal Occupation or Employment During the Last Five Years
------------------ -------------------------------------------------------------
<C> <S>
Thomas H. Johnson President; Director, President & Chief Executive Officer of
Chesapeake Corporation (since 1997); former Vice Chairman (1996-
1997) and President and Chief Executive Officer (1989-1996),
Riverwood International Corporation.
J.P. Causey Jr. Director; Vice President and Secretary. Senior Vice President,
Secretary and General Counsel of Chesapeake Corporation (since
1995); Vice President, Secretary and General Counsel (1986-
1995); Director of C&F Financial Corporation.
Andrew J. Kohut Vice President; Senior Vice President; Strategic Business
Development of Chesapeake Corporation (since 1998); Group Vice
President--Display and Packaging (1996-1998); Group Vice
President--Finance and Strategic Development and Chief Financial
Officer (1995-1996); Vice President--Finance and Chief Financial
Officer (1991-1995).
William T. Tolley Vice President; Senior Vice President--Finance and Chief
Financial Officer of Chesapeake Corporation (since 1998); Group
Vice President--Finance and Chief Financial Officer (1996-1998);
Vice President, Finance and Logistics, Chief Financial Officer,
North American Operations, Carrier Corporation (1994-1996).
</TABLE>
II-3
<PAGE>
SCHEDULE III
SHARES HELD BY CHESAPEAKE, PURCHASER, CERTAIN OF THEIR DIRECTORS, OFFICERS,
EMPLOYEES AND OTHER REPRESENTATIVES AND THEIR NOMINEES AND CERTAIN
TRANSACTIONS BETWEEN ANY OF THEM AND THE COMPANY
As of December 3, 1999, Chesapeake had agreed to purchase 4,106,440 Shares
pursuant to the Purchase Agreement described below and Purchaser was the
record holder of an aggregate of 100 Shares, or less than 1% of the Shares
reported by the Company to be outstanding as of September 1, 1999, in the
Company's Quarterly Report on Form 10-Q for the quarter ended July 31, 1999
(the most recent available filing by the Company). A broker-dealer purchased
such Shares in open-market purchases for the account of Purchaser.
On November 26, 1999, Chesapeake and Ariel Capital Management, Inc., an
Illinois corporation ("Ariel"), entered into a stock purchase agreement (the
"Purchase Agreement") pursuant to which Ariel agreed to use its best efforts
as investment advisor to exercise its discretionary authority to cause Ariel's
clients to sell to Chesapeake an aggregate of 4,106,440 Shares (the "Purchased
Shares"), representing approximately 14.9% of the Company's outstanding
Shares, at a purchase price of $17.25 per Share or approximately $70,836,000
in the aggregate. The Purchase Agreement is conditioned on the satisfaction of
the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and that the transaction not be subject to any adverse litigation
or governmental proceeding. The closing for the transactions contemplated in
the Purchase Agreement (the "Closing") is expected to occur on the second
business day following the satisfaction of the conditions.
If, on the proposed Closing date, Chesapeake's proposed purchase of the
Purchased Shares would not then be permitted under Rule 10b-13 promulgated
under the Exchange Act (because Chesapeake has commenced a public tender offer
for Shares that has not terminated or expired as of that date), the Closing
date will be postponed as necessary to permit closing in compliance with such
Rule.
The Purchase Agreement provides that if, prior to Closing, Chesapeake or any
of its affiliates commences a public tender offer for Shares of the Company at
a purchase price that equals or exceeds $17.25 per Share, then Ariel agrees to
use its best efforts as investment adviser to exercise its discretionary
authority to cause Ariel's clients to: (i) tender the Purchased Shares in such
tender offer; and (ii) execute proxies or written consents in the form
solicited by Chesapeake or any of its affiliates in any proxy or written
consent solicitation commenced in connection with such tender offer.
If, within one year following the Closing date, Chesapeake, directly or
indirectly, acquires a majority of the outstanding Shares of the Company
pursuant to a tender offer, merger, consolidation, business combination or
other similar transaction, then Chesapeake will pay each Ariel client 100% of
the excess, if any, of the per Share consideration paid by Chesapeake in such
transaction over $17.25, multiplied by the number of Shares purchased by
Chesapeake from such Ariel client pursuant to the Purchase Agreement. If,
within one year following the Closing date, any third party not affiliated
with either Chesapeake or Ariel, directly or indirectly, acquires a majority
of the outstanding Shares of the Company pursuant to a tender offer, merger,
consolidation, business combination or other similar transaction, then
Chesapeake will pay each Ariel client the sum of (i) 100% of the excess, if
any, of the highest per share consideration offered by Chesapeake in any
public tender offer for Shares (the "Highest Chesapeake Price") over $17.25
per Share, plus (ii) 50% of the excess, if any, of the per Share consideration
paid by such third party over the Highest Chesapeake Price, multiplied by the
number of Shares purchased by Chesapeake from such Ariel client pursuant to
the Purchase Agreement.
If, prior to the Closing, Chesapeake's purchase of 4,106,440 Shares would
result in Chesapeake becoming (i) an "Acquiring Person" as defined in the
Rights Agreement, or (ii) an "interested stockholder" within the meaning of
Section 203, the number of shares to be purchased under the Purchase Agreement
shall be reduced to one Share less than the number of Shares that, if
purchased, would cause Chesapeake to be deemed (A) an "Acquiring Person" as
defined in the Rights Agreement, or (B) an "interested stockholder" within the
meaning of Section 203.
III-1
<PAGE>
If prior to the Closing, a Distribution Date shall have occurred within the
meaning of the Rights Agreement, Ariel's clients will sell to Chesapeake all
of the Rights associated with the Purchased Shares.
Set forth below are all transactions in Shares that were effected by
Purchaser, Chesapeake, or, to the best knowledge of Purchaser, any of the
persons named in Schedule I or the Nominees or, to their best knowledge, their
associates, during the past 60 days.
TRANSACTIONS EFFECTED DURING THE PAST 60 DAYS
<TABLE>
<CAPTION>
Average Price
Reporting Person Date Shares Purchased Per Share
---------------- ---- ---------------- -------------
<S> <C> <C> <C>
Sheffield, Inc. November 10, 1999 100* $11.94**
Chesapeake Corporation November 26, 1999 4,106,440*** $17.25
</TABLE>
- --------
* Open market purchase effected on the New York Stock Exchange.
** Price excludes commission.
*** Privately negotiated agreement to purchase Shares pursuant to a Stock
Purchase Agreement, dated November 26, 1999, by and between Ariel Capital
Management, Inc. and Chesapeake Corporation.
III-2
<PAGE>
SCHEDULE IV
INFORMATION CONCERNING SHARE OWNERSHIP OF THE CURRENT DIRECTORS AND EXECUTIVE
OFFICERS OF THE COMPANY
The following table sets forth the share ownership of all current directors
and executive officers of the Company as reported in the Company's Proxy
Statement, dated August 23, 1999.
<TABLE>
<CAPTION>
Amount Of Shares Percent
Name Of Beneficial Owner Beneficially Owned Of Class
- ------------------------ ------------------ --------
<S> <C> <C>
Marc P. Shore(1).................................. 4,859,904 17.38%
Leonard J. Verebay(2)............................. 500,000 1.81%
Charles Kreussling(3)............................. 322,377 1.17%
R. Timothy O'Donnell(4)........................... 276,118 1%
Howard M. Liebman(5).............................. 233,269 (6)
Kenneth M. Rosenblum(7)........................... 123,342 (6)
William P. Weidner(8)............................. 57,000 (6)
Kevin J. Bannon(8)................................ 27,750 (6)
Virginia A. Kamsky................................ 4,500 (6)
Andrew N. Shore(9)................................ 223,750 (6)
Sharon R. Fairley................................. 0 (6)
All directors and executive officers as a group
(11 persons)(10)(11)............................. 7,090,710 25.09%
</TABLE>
- --------
(1) See "Ownership of Common Stock--Footnote (1)."
(2) Shares held in grantor retained annuity trust. Under the terms of the
Stockholders' Agreement, these shares are subject to contractual
restrictions on transfer until October 30, 2000, with limited exceptions
for certain types of inter-family, estate planning and affiliate
transactions. These restrictions terminate in various circumstances,
including the occurrence of certain types of capital events and "change of
control" transaction.
(3) Includes 90,000 shares owned by Charles Kreussling's wife, as to which Mr.
Kreussling disclaims beneficial ownership. The table does not include 750
shares owned by one of Mr. Kreussling's adult children who shares the same
household.
(4) Includes: (i) 450 shares owned by Mr. O'Donnell's wife as custodian for
their three minor children; (ii) 22,231 shares owned by Jefferson Capital
Group, Ltd. (of which Mr. O'Donnell is the President and a principal
stockholder); (iii) 87,500 shares which could be acquired on or within 60
days after July 1, 1999 upon the exercise of warrants granted to Jefferson
Capital Group, Ltd.; and (iv) 18,000 shares which could be acquired on or
within 60 days after July 1, 1999 upon the exercise of director options
granted to Mr. O'Donnell under the Company's Incentive Plans.
(5) Includes (i) 94,168 shares which could be acquired on or within 60 days
after July 1, 1999 upon the exercise of stock options granted under the
Company's Incentive Plans; and (ii) 79,101 shares of restricted stock
awarded under the Company's Long-Term Incentive Program, all of which are
subject to forfeiture.
(6) Less than 1%.
(7) Includes: (i) 34,060 shares which could be acquired on or within 60 days
after July 1, 1999 upon the exercise of stock options granted under the
Company's Incentive Plans; and (ii) 5,178 shares of restricted stock
awarded under the Company's Long-Term Incentive Program, all of which are
subject to forfeiture.
(8) Includes: (i) 24,000 shares owned by William P. Weidner's wife, as to
which Mr. Weidner disclaims beneficial ownership; and (ii) 18,000 shares
which could be acquired on or within 60 days after July 1, 1999 upon the
exercise of director options granted under the Company's Incentive Plans.
(9) Includes: (i) 3,500 shares which could be acquired on or within 60 days
after July 1, 1999 upon exercise of stock options granted under the
Company's Incentive Plans; (ii) 6,000 shares of restricted stock awarded
under the Company's Long-Term Incentive Program, all of which are subject
to forfeiture; (iii) 650 shares owned by Andrew N. Shore's wife, as to
which Mr. Shore disclaims beneficial ownership; and (iv) 66,300 shares
held by the Shore Trust (as described below). As of July 1, 1999, Andrew
N. Shore served as co-trustee of the Shore Trust which held 66,300 shares
of Common Stock for the benefit of one other child of Paul B. Shore. As
co-trustee, Andrew N. Shore shared decision-making authority with respect
to any shares of Common Stock held by the Shore Trust. Andrew N. Shore
disclaims beneficial ownership of all of such shares.
(10) The total number of directors and executive officers of the Company
includes two executive officers who were not included in the above table.
(11) Includes 695,181 shares subject to stock options or warrants which could
be acquired on or within 60 days after July 1, 1999 and 184,929 shares of
restricted stock awarded pursuant to the Company's Long-Term Incentive
Program, all of which are subject to forfeiture. Does not include the
shares held by Messrs. Melvin L. Braun and Floyd G. Glinert, who, until
recently, were Directors of the Company. Where more than one person is
deemed to be a beneficial owner of any particular shares, such shares
have been counted toward the total listed only once.
IV-1
<PAGE>
FORM OF
CONSENT SOLICITED ON BEHALF OF SHEFFIELD, INC.
Unless otherwise specified below, the undersigned, a holder of shares of
common stock, par value $0.01 per share (the "Common Stock"), of Shorewood
Packaging Corporation (the "Company") on December , 1999 (the "Record Date"),
hereby consents pursuant to Section 228 of the Delaware General Corporation
Law, with respect to all of the shares of Common Stock which the undersigned
is entitled to vote, to the taking of the following actions (collectively, the
"Proposals") without a meeting of the stockholders of the Company:
[X] PLEASE MARK VOTES AS IN THIS EXAMPLE.
Sheffield recommends that you consent to all of the following actions.
(If you sign, date and return this card without indicating your vote, you
will be deemed to have consented to each Proposal)
Proposal No. 1.
Amendment to Article III, Section 1 of the Amended and Restated By-Laws of
the Company (the "Amended Bylaws") to remove the provision establishing a
staggered board of directors by (i) deleting the second, third and fourth
sentences of Article III, Section 1 and inserting in lieu thereof the sentence
"Directors shall be elected annually to serve for one year terms" and (ii)
deleting in the third sentence of Article III, Section 2 of the Bylaws the
phrase "at which directors of this class are to be elected."
[_] CONSENTS [_] WITHHOLDS CONSENT [_] ABSTAINS
Proposal No. 2.
The removal of each of the nine current members of the Board of Directors of
the Company (the "Company Board"), Kevin J. Bannon, Sharon R. Fairley,
Virginia A. Kamsky, Howard M. Liebman, R. Timothy O'Donnell, Andrew N. Shore,
Marc P. Shore, Leonard J. Verebay, and William P. Weidner, and any other
person or persons who may be members of the Company Board at the time the
Proposals become effective (other than the persons elected as a result of the
adoption of Proposal No. 4 set forth below).
[_] CONSENTS [_] WITHHOLDS CONSENT [_] ABSTAINS
Instruction: To consent to the removal of certain of the current directors
of the Company, but not all of them, check the "CONSENTS" box above and write
the name of each person you do not wish removed in the following space:
-------------------------------------------------------------------------
Proposal No. 3.
Amendment of Article III, Section 1 of the Amended Bylaws of the Company to
fix the number of directors of the Company at three, by deleting the phrase
"to consist of not less than three nor more than twelve directors, as shall be
determined by resolution of the Board of Directors from time to time" and
inserting in lieu thereof the phrase "to consist of three (3) directors."
[_] CONSENTS [_] WITHHOLDS CONSENT [_] ABSTAINS
(Continued and to be signed and dated on the reverse side)
<PAGE>
(Continued from other side)
Proposal No. 4.
The Election of each of , and [individuals not currently
affiliated with Chesapeake or Purchaser to be named prior to distribution of
consent solicitation materials] (together, the "Nominees") as a member of the
Company Board, to serve until the next annual meeting of Stockholders and
until his successor has been duly elected and qualified.
[_] CONSENTS [_] WITHHOLDS CONSENT [_] ABSTAINS
If you wish to consent to the election of certain of the Nominees, but not
all of them, check the "CONSENTS" box above and write the name of each such
person you do not wish elected in the following space:
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If no box is marked above with respect to this Proposal, the undersigned
will be deemed to consent to such Proposal, except that the undersigned will
not be deemed to consent to the election of any candidate whose name is
written-in in the space provided above.
Proposal No. 5.
Repeal each amendment of the Amended Bylaws (whether effected by supplement
to, deletion from or revision of the Bylaws) adopted subsequent to November
22, 1999, and at or prior to the time the Proposals become effective (other
than the amendments adopted as a result of the adoption of Proposal No. 1 and
Proposal No. 3 set forth above).
[_] CONSENTS [_] WITHHOLDS CONSENT [_] ABSTAINS
Note: Each of Proposal Nos. 3-5 is conditioned upon the approval of Proposal
No. 1. Proposal No. 2 is conditioned upon the approval of Proposal No. 1 and
at least one of the Nominees listed in Proposal No. 4 being elected as a
member of the Company Board. None of Proposal Nos. 3-5 is conditioned upon the
approval of any other of Proposal Nos. 3-5.
If you have any questions or need assistance, please contact D.F. King &
Co., Inc., which is assisting Purchaser in this consent solicitation. Call
toll-free 1-800-578-5378.
Consents can only be given by the Stockholder of record on the Record Date.
Please sign your name below exactly as it appears on your stock certificate(s)
on the Record Date or on the label affixed hereto. When Shares are held by
joint tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by president or other
authorized officer. If a partnership, please sign in partnership name by an
authorized person.
Dated:
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Signature (Title, if any)
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Signature if held jointly
Please sign, date and mail your consent promptly in the enclosed postage-
paid envelope.
