SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
SHOREWOOD PACKAGING CORPORATION
-------------------------------
(Name of Issuer)
COMMON STOCK, $0.01 par value per share
(Including Associated Rights)
-----------------------------
(Title of class of securities)
825229107
---------
(CUSIP Number)
Thomas H. Johnson
President & Chief Executive Officer
Chesapeake Corporation
1021 East Cary Street
Richmond, Virginia 23218-2350
Telephone No.: (804) 697-1000
-----------------------------
(Name, address and telephone number of person authorized to
receive notices and communications)
Copy to:
Gary E. Thompson, Esq.
Hunton & Williams
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219-4074
(804) 788-8200
November 26, 1999
-----------------
(Date of event which requires filing of this statement)
If the filing person has previously filed a statement
on Schedule 13G to report the acquisition that is the
subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4),
check the following box |_|.
The information required in the remainder of this cover page shall not be deemed
to be "filed" for the purposes of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act,
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 44 Pages
<PAGE>
CUSIP No. 825229107 13D Page 2 of 44 Pages
________________________________________________________________________________
1 NAME OF REPORTING PERSONS: Chesapeake Corporation
IDENTIFICATION NOS. OF ABOVE PERSONS: 54-0166880
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [_]
(b) [_]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS*
WC
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [_]
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Commonwealth of Virginia
________________________________________________________________________________
7 SOLE VOTING POWER
NUMBER OF 4,106,440(1)
SHARES _________________________________________________________________
8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 100
_________________________________________________________________
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON 4,106,440(1)
_________________________________________________________________
WITH 10 SHARED DISPOSITIVE POWER
100
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,106,540(1)
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[_]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
14.9%
________________________________________________________________________________
14 TYPE OF REPORTING PERSON*
HC; CO
________________________________________________________________________________
(1) On November 26, 1999, Chesapeake Corporation entered into a stock
purchase agreement with a stockholder of the Issuer pursuant to which Chesapeake
agreed to purchase 4,106,440 shares of common stock of the Issuer, subject to
adjustment as set forth in the stock purchase agreement.
<PAGE>
CUSIP No. 825229107 13D Page 3 of 44 Pages
________________________________________________________________________________
1 NAME OF REPORTING PERSONS: Sheffield, Inc.
IDENTIFICATION NOS. OF ABOVE PERSONS: Applied for.
________________________________________________________________________________
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [_]
(b) [_]
________________________________________________________________________________
3 SEC USE ONLY
________________________________________________________________________________
4 SOURCE OF FUNDS*
AF
________________________________________________________________________________
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e) [_]
________________________________________________________________________________
6 CITIZENSHIP OR PLACE OF ORGANIZATION
State of Delaware
________________________________________________________________________________
7 SOLE VOTING POWER
NUMBER OF --
SHARES _________________________________________________________________
8 SHARED VOTING POWER
BENEFICIALLY
OWNED BY 100
_________________________________________________________________
EACH 9 SOLE DISPOSITIVE POWER
REPORTING
PERSON --
_________________________________________________________________
WITH 10 SHARED DISPOSITIVE POWER
100
________________________________________________________________________________
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
100
________________________________________________________________________________
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES*
[_]
________________________________________________________________________________
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
less than 1%
________________________________________________________________________________
14 TYPE OF REPORTING PERSON*
CO
________________________________________________________________________________
<PAGE>
Item 1. Security and Issuer.
--------------------
This statement on Schedule 13D (this "Statement" or the "Schedule 13D")
relates to the common stock, par value $0.01 per share (the "Common Stock"),
including the associated rights to purchase shares of Series B Junior
Participating Preferred Stock (the "Rights", and together with the Common Stock,
the "Shares"), of Shorewood Packaging Corporation, a Delaware corporation (the
"Issuer" or the "Company"). The principal executive offices of the Issuer are
located at 277 Park Avenue, New York, New York 10172.
Item 2. Identity and Background.
------------------------
(a)-(c) This Statement is being filed by Chesapeake Corporation, a
Virginia corporation ("Chesapeake"), and Sheffield, Inc., a Delaware corporation
and wholly owned subsidiary of Chesapeake ("Sheffield" and, together with
Chesapeake, the "Reporting Persons"). Chesapeake, 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 shares are listed on the New
York Stock Exchange and, as of November 26, 1999, Chesapeake had a market
capitalization of approximately $573 million. Sheffield to date has engaged in
no activities other than those incident to its formation and the purchase of
Shares. The address of the Reporting Persons' principal business and principal
office is 1021 East Cary Street, Richmond, Virginia 23218-2350.
The name, address and present principal occupation of each of the
directors and executive officers of the Reporting Persons are set forth in
Appendix A which is attached hereto.
(d) During the last five years, none of the Reporting Persons or, to
the best of the Reporting Persons' knowledge, any of the directors or executive
officers of the Reporting Persons, has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors).
(e) During the last five years, none of the Reporting Persons or, to
the best of the Reporting Persons' knowledge, any of the directors or executive
officers of the Reporting Persons, has been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding is or was subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or finding any violation with respect to such laws.
(f) Except as provided in Appendix A attached hereto, each director and
executive officer of the Reporting Persons is a citizen of the United States.
Page 4 of 44 Pages
<PAGE>
Item 3. Source and Amount of Funds or Other Consideration.
--------------------------------------------------
The amount of funds to be used by Chesapeake to purchase Shares
pursuant to the Purchase Agreement (as defined in Item 6 below) is expected to
be approximately $70,836,000 (assuming that Chesapeake purchases 4,106,440
Shares pursuant to the Purchase Agreement at a price of $17.25 per Share). The
amount of funds used by Sheffield to purchase its 100 Shares was approximately
$1,200. Sheffield received its funds as a capital contribution from Chesapeake.
All of such funds used or to be used by Chesapeake to acquire the Shares were or
will be provided from internally generated funds of Chesapeake. The transactions
are set forth in Appendix B attached hereto and Chesapeake's agreement to
purchase Shares is described in Item 6.
Item 4. Purpose of Transaction.
-----------------------
Between August 1, 1997, 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 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.
On October 26, 1999, Mr. Marc P. Shore, Chairman of the Board and Chief
Executive Officer of the Company, called Mr. Thomas H. Johnson, President and
Chief Executive Officer of Chesapeake, to propose that the Company acquire
Chesapeake for $40.00 per share of common stock of Chesapeake. The Company's
proposal was outlined in a letter, dated October 26, 1999, from Mr. Shore to Mr.
Johnson. A copy of such letter is attached to this Schedule 13D as Exhibit 1(a)
and is incorporated herein by reference. During the telephone call on October
26, 1999, Mr. Johnson stated that Chesapeake was not for sale, but that the
Chesapeake Board of Directors (the "Chesapeake Board") would consider the
proposal included in Mr. Shore's letter (the "Shorewood Proposal").
On October 29, 1999, Mr. Johnson delivered a letter to Mr. Shore by
facsimile reiterating that Chesapeake was not for sale, but that the Chesapeake
Board would consider carefully the Shorewood Proposal and respond to Shorewood
by November 5, 1999. A copy of such letter is attached to this Schedule 13D as
Exhibit 1(b) and is incorporated herein by reference.
Page 5 of 44 Pages
<PAGE>
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 & Co. and Donaldson, Lufkin & Jenrette, 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 Board of Directors of
the Company (the "Company Board"), he indicated that a meeting of the Company
Board to consider such an offer would be a "very short one."
After the meeting on November 4, 1999, Mr. Johnson delivered a 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 (the "Proposed Acquisition") and set forth the merits of the
Proposed Acquisition and indicated Chesapeake's desire to enter into a
negotiated transaction. A copy of such letter is attached to this Schedule 13D
as Exhibit 1(c) and is incorporated herein by reference.
On November 18, 1999, Mr. Shore delivered a letter to Mr. Johnson by
facsimile rejecting Chesapeake's offer to acquire the Company. A copy of such
letter is attached hereto as Exhibit 1(d) and is incorporated herein by
reference.
Also on November 18, 1999, the Company issued a press release
disclosing the Shorewood Proposal and the Proposed Acquisition. A copy of such
press release is attached hereto as Exhibit 1(e) and is incorporated herein by
reference.
Page 6 of 44 Pages
<PAGE>
Also on November 18, 1999, Chesapeake issued a press release confirming
the Shorewood Proposal and the Proposed Acquisition. A copy of such press
release is attached hereto as Exhibit 1(f) and is incorporated herein by
reference.
On November 22, 1999, Mr. Johnson sent a letter to each of the
directors of the Company Board reiterating the terms of the Proposed Acquisition
and Chesapeake's willingness to commence immediate good faith negotiations with
the possibility of increasing Chesapeake's offer after appropriate due diligence
and access to the Company's business plan and of utilizing alternatives to an
all-cash structure that could offer a tax-advantaged alternative to the
Company's stockholders. A copy of such letter is attached hereto as Exhibit 1(g)
and is incorporated herein by reference.
Also on November 22, 1999, Chesapeake issued a press release
reiterating the terms of the Proposed Acquisition and its willingness to
commence immediate good faith negotiations with the possibility of increasing
Chesapeake's offer after appropriate due diligence and access to the Company's
business plan and of utilizing alternatives to an all-cash structure that could
offer a tax-advantaged alternative to the Company's stockholders. A copy of such
press release is attached hereto as Exhibit 1(h) and is incorporated herein by
reference.
On November 29, 1999, Chesapeake issued a press release disclosing its
agreement to purchase 4,106,440 Shares pursuant to the Purchase Agreement. A
copy of such press release is attached hereto as Exhibit 1(i) and is
incorporated herein by reference.
The purpose of the purchase by Chesapeake of the 4,106,440 Shares
referred to in Item 5 is to acquire a significant equity position in the Issuer.
The Reporting Persons currently intend to seek to acquire control of the Issuer,
although they have not formulated any specific plan in this regard and, as
indicated below, there can be no assurance that any such plan will be developed
or as to the terms or the timing of any such plan. Any such plan that may be
formulated could involve proposing a business combination transaction with the
Issuer, making a tender offer for some or all of the Shares, or commencing a
proxy or consent solicitation to remove any provisions of the Company's bylaws
which may impede the acquisition of control of the Company or to change the
present Company Board, including changing the number or term of directors or
filling any vacancies on the Company Board. The Reporting Persons may seek
further contact with the Issuer, the Issuer's representatives and other persons
interested in the Issuer, for the purposes of discussing the Proposed
Acquisition or other combination of the Reporting Persons and the Issuer.
Subject to applicable legal requirements and the factors referred to
below, the Reporting Persons may purchase from time to time in open market or
privately negotiated transactions additional Shares. In determining whether to
purchase additional Shares and in formulating any plan or proposal to acquire
control of the Issuer, the Reporting Persons intend to consider various factors,
including, without limitation, the effect of any legal impediments to further
purchases, the Issuer's financial condition, business, operations and prospects,
other developments concerning the Issuer, the reaction of the Issuer to the
Reporting Persons' ownership of Shares, the actions by the Board of Directors of
the Issuer, price levels of the Shares, other opportunities available to
Chesapeake, developments with respect to Chesapeake's business and general
Page 7 of 44 Pages
<PAGE>
economic, monetary and stock market conditions. In addition, depending upon,
among other things, the matters referred to above, the Reporting Persons may
determine to dispose of all or a portion of their Shares.
On November 29, 1999, Chesapeake filed with the Federal Trade
Commission (the "FTC") and the Antitrust Division of the Department of Justice
(the "Antitrust Division") a Notification and Report Form under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") to permit
Chesapeake to acquire the Shares pursuant to the Purchase Agreement. The Issuer
is also obligated to make a filing under the HSR Act. Under the HSR Act,
Chesapeake is obligated to observe a 30-day waiting period following its filing
prior to consummating any purchases of Shares in excess of $15 million
(including the consummation of the purchase of Shares pursuant to the Purchase
Agreement), unless such waiting period is terminated earlier by the FTC or the
Antitrust Division. Chesapeake has requested early termination of such waiting
period. If, prior to the expiration of such waiting period, the FTC or Antitrust
Division requests additional information from Chesapeake or the Issuer, such
waiting period would be extended until 20 days after substantial compliance with
such request by both Chesapeake and the Issuer.
Other than as indicated above, the Reporting Persons do not have any
present plans or proposals which relate to or would result in any of the
following (although the Reporting Persons reserve the right to develop such
plans or proposals): (i) the acquisition of additional securities of the Issuer,
or the disposition of securities of the Issuer; (ii) an extraordinary corporate
transaction, such as a merger, reorganization or liquidation, involving the
Issuer or any of its subsidiaries; (iii) a sale or transfer of a material amount
of assets of the Issuer or any of its subsidiaries; (iv) any change in the
present Board of Directors or management of the Issuer, including any plans or
proposals to change the number or term of directors or to fill any existing
vacancies on the Issuer's Board of Directors; (v) any material change in the
present capitalization or dividend policy of the Issuer; (vi) any other material
change in the Issuer's business or corporate structure; (vii) any change in the
Issuer's charter or bylaws or other actions which may impede the acquisition of
control of the Issuer by any person; (viii) causing a class of securities of the
Issuer to be delisted from a national securities exchange or to cease to be
authorized to be quoted in an inter-dealer quotation system of a registered
national securities association; (ix) a class of equity securities of the Issuer
becoming eligible for termination of registration pursuant to Section 12(g)(4)
of the Exchange Act; or (x) any action similar to any of those enumerated above.
Item 5. Interest in Securities of the Issuer.
-------------------------------------
(a) The aggregate number and percentage of Shares to which this Statement
relates is 4,106,540 Shares, representing 14.9% of the 27,560,000 shares of
Common Stock outstanding as reported by the Issuer on September 1, 1999, in the
Issuer's Quarterly Report on Form 10-Q for the quarter ended July 31, 1999 (the
most recent available filing by the Issuer with the Securities and Exchange
Commission). Sheffield owns 100 Shares, representing less than 1% of the issued
and outstanding Shares. Such Shares were purchased in an open market transaction
(as set forth in Appendix B attached hereto). Pursuant to the Purchase
Agreement, Chesapeake has agreed to purchase 4,106,440 Shares (subject to
adjustment as set forth in the Purchase Agreement) from a stockholder in a
privately negotiated transaction.
Page 8 of 44 Pages
<PAGE>
(b) By virtue of its ownership of 100% of the capital stock of Sheffield,
Chesapeake has the shared power to direct the vote and the shared power to
direct the disposition of the 100 Shares owned by Sheffield. Chesapeake will
have, upon purchase of the 4,106,440 Shares pursuant to the Purchase Agreement,
the sole power to vote or direct the vote and the sole power to dispose or to
direct the disposition of such Shares. Prior to the purchase of the Shares
pursuant to the Purchase Agreement, Chesapeake will have no right to vote or
direct the vote of such Shares.
(c) Appendix B attached hereto lists all transactions in the Shares,
described in Item 4 and this Item 5, which transactions were effected by
Chesapeake or Sheffield during the past 60 days. Item 6 describes the
transaction pursuant to which Chesapeake has agreed to purchase 4,106,440
Shares.
(d) Not applicable.
(e) Not applicable.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
---------------------------------------------------------------------
to Securities of the Issuer.
----------------------------
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 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 HSR Act and that the transaction not be subject to any
adverse litigation or governmental proceeding. The closing for the transaction
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
Issuer 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.
Page 9 of 44 Pages
<PAGE>
If, within one year following the Closing date, Chesapeake, directly or
indirectly, acquires a majority of the outstanding Shares of the Issuer 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 Issuer 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 of the Issuer, dated as of June 12, 1995, (the "Rights
Agreement"), or (ii) an "interested stockholder" within the meaning of Section
203 of the Delaware General Corporation Law ("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 the Buyer
to be deemed (A) an "Acquiring Person" as defined in the Rights Agreement, or
(B) an "interested stockholder" within the meaning of Section 203.
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.
The foregoing description is qualified by and subject to the terms of
the Purchase Agreement. A copy of the Purchase Agreement is attached hereto as
Exhibit 2 and is incorporated herein by reference.
Item 7. Material to be Filed as Exhibits.
The following documents are being filed as exhibits to this Statement
and are each incorporated herein by reference.
Exhibit 1(a) Letter, dated October 26, 1999, from Marc P. Shore,
Shorewood Packaging Corporation, to
Thomas H. Johnson, Chesapeake Corporation.
Exhibit 1(b) Letter, dated October 29, 1999, from
Thomas H. Johnson to Marc P. Shore.
Exhibit 1(c) Letter, dated November 10, 1999, from
Thomas H. Johnson to Marc P. Shore.
Page 10 of 44 Pages
<PAGE>
Exhibit 1(d) Letter, dated November 18, 1999, from Marc P. Shore
to Thomas H. Johnson.
Exhibit 1(e) Press Release, dated November 18, 1999, issued by
Shorewood Packaging Corporation.
Exhibit 1(f) Press Release, dated November 18, 1999, issued by
Chesapeake Corporation.
Exhibit 1(g) Letter, dated November 22, 1999, from
Thomas H. Johnson to the Board of Directors of
Shorewood Packaging Corporation.
Exhibit 1(h) Press Release, dated November 22, 1999, issued by
Chesapeake Corporation.
Exhibit 1(i) Press Release, dated November 29, 1999, issued by
Chesapeake Corporation.
Exhibit 2 Stock Purchase Agreement, dated November 26, 1999,
between Chesapeake Corporation and Ariel Capital
Management, Inc.
Exhibit 3 Joint Filing Agreement
Page 11 of 44 Pages
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of their knowledge and belief,
the undersigned certify that the information set forth in this statement is
true, complete and correct.
Date: November 29, 1999 CHESAPEAKE CORPORATION
By: /s/ J. P. Causey Jr.
------------------------
Name: J. P. Causey Jr.
Title: Senior Vice President,
Secretary and General Counsel
Date: November 29, 1999 SHEFFIELD, INC.
By: /s/ J. P. Causey Jr.
-------------------------
Name: J. P. Causey Jr.
Title: Vice President and Secretary
Page 12 of 44 Pages
<PAGE>
EXHIBIT INDEX
Exhibit Number Exhibit
-------------- -------
Exhibit 1(a) Letter, dated October 26, 1999, from Marc P. Shore,
Shorewood Packaging Corporation, to Thomas H. Johnson,
Chesapeake Corporation.
Exhibit 1(b) Letter, dated October 29, 1999, from Thomas H. Johnson
to Marc P. Shore.
Exhibit 1(c) Letter, dated November 10, 1999, from Thomas H. Johnson
to Marc P. Shore.
Exhibit 1(d) Letter, dated November 18, 1999, from Marc P. Shore to
Thomas H. Johnson.
Exhibit 1(e) Press Release, dated November 18, 1999, issued by
Shorewood Packaging Corporation.
Exhibit 1(f) Press Release, dated November 18, 1999, issued by
Chesapeake Corporation.
Exhibit 1(g) Letter, dated November 22, 1999, from Thomas H. Johnson
to the Board of Directors of Shorewood Packaging
Corporation.
Exhibit 1(h) Press Release, dated November 22, 1999, issued by
Chesapeake Corporation.
Exhibit 1(i) Press Release, dated November 29, 1999, issued by
Chesapeake Corporation.
Exhibit 2 Stock Purchase Agreement, dated November
26, 1999, between Chesapeake Corporation and
Ariel Capital Management, Inc.
Exhibit 3 Joint Filing Agreement
Page 13 of 44 Pages
<PAGE>
APPENDIX A
----------
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS
OF CHESAPEAKE AND SHEFFIELD
The following tables set forth the name, business address, principal
occupation and material positions held within the past five years of each
director and executive officer of Chesapeake. Each person has a business address
at 1021 East Cary Street, Richmond, Virginia 23218-2350, and is a citizen of the
United States unless a different business address or citizenship is indicated
under his or her name.
DIRECTORS AND EXECUTIVE OFFICERS OF CHESAPEAKE CORPORATION
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR
NAME AND CITIZENSHIP OFFICE(S) EMPLOYMENT DURING THE LAST FIVE YEARS
- -------------------------- ------------------------------------ ----------------------------------------------------
<S> <C>
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 President & Chief Executive Officer of Chesapeake
Executive Officer 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., Carustar 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.
</TABLE>
Page 14 of 44 Pages
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR
NAME AND CITIZENSHIP OFFICE(S) EMPLOYMENT DURING THE LAST FIVE YEARS
- -------------------------- ------------------------------------ ----------------------------------------------------
<S> <C>
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 (1999) and Director, Hershey Foods
Corporation, a manufacturer of confectionery
products, and 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.
J.P. Causey Jr. Senior Vice President, Secretary Senior Vice President, Secretary & General
and General Counsel Counsel (since 1995); Vice President, Secretary
& General Counsel (1986-1995); Director of C&F
Financial Corporation.
Keith Gilchrist Executive Vice President--European Executive Vice President--European Packaging
(a citizen of the Packaging (since 1999); Chief Executive, Field Group plc
United Kingdom) (since 1993).
Andrew J. Kohut Senior Vice President--Strategic Senior Vice President, Strategic Business
Development Development (since 1998); Group Vice President--Display
& Packaging (1996-1998); Group Vice President--Finance
& Strategic Development & Chief Financial Officer
(1995-1996); Vice President--Finance and Chief
Financial Officer (1991-1995).
Octavio Orta Executive Vice President--Display Executive Vice President--Display & Packaging
and 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).
</TABLE>
Page 15 of 44 Pages
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR
NAME AND CITIZENSHIP OFFICE(S) EMPLOYMENT DURING THE LAST FIVE YEARS
- -------------------------- ------------------------------------ ----------------------------------------------------
<S> <C>
Robert F. Schick Senior Vice President--Containers Senior Vice President--Containers (since 1998);
President, Chesapeake Packaging Co. (since
1996); Vice President, Chesapeake Packaging Co.
(1994-1996).
Thomas A. Smith Vice President-- Vice President--Human Resources & Assistant
Human Resources Secretary (since 1987).
William T. Tolley Senior Vice President-- Senior Vice President--Finance & Chief Financial
Finance & Chief Financial Officer Officer (since 1998); Group Vice President--Finance
& Chief Financial Officer (1996-1998); Vice President,
Finance and Logistics, Chief Financial Officer, North
American Operations, Carrier Corporation (1994-1996).
</TABLE>
Page 16 of 44 Pages
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF SHEFFIELD, INC.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR
NAME AND CITIZENSHIP OFFICE(S) EMPLOYMENT DURING THE LAST FIVE YEARS
- ---------------------------- ---------------------------- ---------------------------------------------------------
<S> <C>
Thomas H. Johnson President 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.
J.P. Causey, Jr. Director, Vice President Senior Vice President, Secretary & General Counsel of
and Secretary Chesapeake Corporation (since 1995). Vice President,
Secretary & 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 & Packaging (1996-1998). Group Vice
President--Finance & Strategic Development & Chief
Financial Officer (1995-1996). Vice President--Finance
and Chief Financial Officer (1991-1995).
William T. Tolley Vice President Senior Vice President--Finance & Chief Financial
Officer of Chesapeake Corporation (since 1998). Group
Vice President--Finance & Chief Financial Officer
(1996-1998). Vice President, Finance and Logistics,
Chief Financial Officer, North American Operations,
Carrier Corporation (1994-1996).
</TABLE>
Page 17 of 44 Pages
<PAGE>
APPENDIX B
TRANSACTIONS EFFECTED DURING THE PAST 60 DAYS
<TABLE>
<CAPTION>
Shares Purchased (Sold) Average Price
Reporting Person Date Per Share
- ------------------------------- ---------------------------- ---------------------------- ----------------------------
<S> <C>
Sheffield, Inc. November 10, 1999 100** $11 15/16*
Chesapeake Corporation November 26, 1999 4,106,440*** $17.25
</TABLE>
* Price excludes commission.
** Open market purchase effected on the New York Stock Exchange.
*** 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.
Page 18 of 44 Pages
EXHIBIT 1(a)
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.
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
Page 19 of 44 Pages
<PAGE>
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
Page 20 of 44 Pages
EXHIBIT 1(b)
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.
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
THJ:shh
Page 21 of 44 Pages
EXHIBIT 1(c)
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 it 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.
Page 22 of 44 Pages
<PAGE>
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
Page 23 of 44 Pages
EXHIBIT 1(d)
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.
Page 24 of 44 Pages
<PAGE>
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
Page 25 of 44 Pages
EXHIBIT 1(e)
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
Page 26 of 44 Pages
<PAGE>
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 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.
Page 27 of 44 Pages
EXHIBIT 1(f)
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 a specialty packaging and
Page 28 of 44 Pages
<PAGE>
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 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.
Page 29 of 44 Pages
EXHIBIT 1(g)
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
THJ:shh
Page 30 of 44 Pages
EXHIBIT 1(h)
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.
Page 31 of 44 Pages
<PAGE>
We look forward to your prompt response, and to commencing good faith
negotiations regarding our proposal.
Sincerely,
/s/ Thomas H. Johnson
---------------------
Thomas H. Johnson
THJ:shh
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 Corporation'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.
Page 32 of 44 Pages
<PAGE>
FOR MEDIA RELATIONS, CALL: FOR INVESTOR RELATIONS, CALL:
Molly Remes William Tolley/Joel Mostrom
804-697-1110 804-697-1157/804-697-1147
Joele Frank or Andy Brimmer
Abernathy MacGregor Frank
212-371-5999
Page 33 of 44 Pages
EXHIBIT 1(i)
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.
Page 34 of 44 Pages
<PAGE>
###
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 reported filed by the Company with the Securities
and Exchange Commission.
FOR MEDIA RELATIONS, CALL: FOR INVESTOR RELATIONS, CALL:
Molly Remes William Tolley/Joel Mostrom
804-697-1110 804-697-1157/804-697-1147
Joele Frank or Andy Brimmer
Abernathy MacGregor Frank
212-371-5999
Page 35 of 44 Pages
EXHIBIT 2
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is made and entered
into as of this 26th day of November, 1999, by and between ARIEL CAPITAL
MANAGEMENT, INC., an Illinois corporation ("Ariel"), and CHESAPEAKE CORPORATION,
a Virginia corporation (the "Buyer").
RECITALS
WHEREAS, Ariel is a registered investment adviser whose various
clients, including public investment companies and separate investment accounts
(collectively, "Ariel's Clients"), are the beneficial owners of approximately
5.6 million shares of common stock, $0.01 par value per share ("Common Stock"),
together with the associated rights to purchase shares of Series B Junior
Participating Preferred Stock (the "Rights," and together with the Common Stock,
the "Shares"), of SHOREWOOD PACKAGING CORPORATION, a Delaware corporation (the
"Corporation"); and
WHEREAS, Buyer desires to purchase, and Ariel desires to use its best
efforts as investment adviser to exercise its discretionary authority to cause
Ariel's Clients to sell, an aggregate 4,106,440 Shares (the "Purchased Shares"),
representing approximately 14.9% of the Corporation's outstanding Shares,
pursuant to this Agreement.
NOW, THEREFORE, in consideration of the premises, and of the mutual
covenants and promises set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
SECTION ONE
PURCHASE AND SALE OF STOCK;
AGREEMENT TO TENDER
(a) Upon all of the terms and subject to all of the conditions of this
Agreement, Ariel hereby agrees to use its best efforts as investment adviser to
exercise its discretionary authority to cause Ariel's Clients to transfer,
assign and convey to Buyer at the Closing (as defined below), and Buyer hereby
agrees to purchase and accept from Ariel's Clients at the Closing, the Purchased
Shares. To effect such purchase and sale, at a meeting to take place at the
principal offices of Ariel (the "Closing") on the Closing Date (as defined
below): (i) Ariel's Clients will deliver to Buyer certificates representing the
Purchased Shares, duly endorsed for transfer to Buyer, or acceptable evidence of
book-entry transfer of the Purchased Shares to Buyer; and (ii) Buyer shall pay
to each Ariel Client an amount equal to $17.25 (the "Purchase Price") multiplied
by the number of Purchased Shares purchased by Buyer from such Ariel Client,
such amount to be paid in cash by wire transfer of immediately available funds
in accordance with wire instructions to be provided to Buyer. If, prior to the
Closing, a Distribution Date shall have occurred within the meaning of the
Rights Agreement of the Corporation, dated as of June 12, 1995 (the "Rights
Page 36 of 44 Pages
<PAGE>
Agreement"), then, in addition to the foregoing, Ariel's Clients shall transfer,
assign and convey to Buyer at the Closing any and all Rights and the
certificates relating thereto (if any) which are associated with the Purchased
Shares.
(b) Unless otherwise agreed by the parties hereto, the closing date
(the "Closing Date") shall be the second business day following the satisfaction
or waiver of all of the conditions to Closing set forth in Section Five hereto.
(c) Notwithstanding the foregoing, if for any reason prior to the
Closing, Buyer's purchase of the Purchased Shares would result in the Buyer
becoming (i) an "Acquiring Person" as defined in the Rights Agreement, or (ii)
an "interested stockholder" within the meaning of Section 203 of the Delaware
General Corporation Law ("Section 203"), the number of Purchased Shares
automatically shall be deemed and shall be reduced to one Share less than the
number of Shares that, if purchased, would cause the Buyer to be deemed (i) an
"Acquiring Person" as defined in the Rights Agreement, or (ii) an "interested
stockholder" within the meaning of Section 203.
(d) If, prior to the Closing, Buyer or any of its affiliates (as
defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), commences a public tender offer for Shares of the Corporation
at a cash purchase price that equals or exceeds the Purchase Price 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 Buyer or any of its affiliates in any proxy or written consent
solicitation commenced in connection with such tender offer.
SECTION TWO
ADJUSTMENT OF THE PURCHASE PRICE
UPON A SUBSEQUENT TENDER OFFER OR MERGER
(a) If, within one year following the Closing Date, (i) Buyer or any of
its affiliates, directly or indirectly, acting alone or in concert with others,
acquires ownership (including, but not limited to, beneficial ownership as
defined in Rule 13d-3 under the Exchange Act) of a majority of the outstanding
Shares of the Corporation pursuant to a tender offer, merger, consolidation,
business combination or other similar transaction (each of the foregoing, a
"Transaction"); or (ii) any third party not affiliated with either Buyer or
Ariel, directly or indirectly, acting alone or in concert with others, acquires
ownership (including, but not limited to, beneficial ownership as defined in
Rule 13d-3 under the Exchange Act) of a majority of the outstanding Shares of
the Corporation pursuant to a tender offer, merger, consolidation, business
combination or other similar transaction (each of the foregoing, a "Third Party
Transaction"), then the Purchase Price paid by Buyer to Ariel's Clients shall be
adjusted in accordance with this Section.
(b) In the event a Transaction occurs after the Closing Date, Buyer
shall promptly pay to each Ariel Client an amount in cash equal to 100% of the
excess, if any, of the per Share consideration paid in such Transaction over the
Purchase Price, multiplied by the number of Purchased Shares purchased by Buyer
from such Ariel Client. In the event a Third Party Transaction occurs after the
Page 37 of 44 Pages
<PAGE>
Closing Date, Buyer shall promptly pay to each Ariel Client an amount in cash
equal to the sum of (i) 100% of the excess, if any, of the highest per Share
consideration offered by Buyer in any public tender offer for Shares of the
Corporation prior to the closing of such Third Party Transaction (the "Highest
Buyer Price"), over the Purchase Price, multiplied by the number of Purchased
Shares purchased by Buyer from such Ariel Client; plus (ii) 50% of the excess,
if any, of the per Share consideration paid in such Third Party Transaction over
the Highest Buyer Price, multiplied by the number of Purchased Shares purchased
by Buyer from such Ariel Client. In the event the consideration paid in any
Transaction or Third Party Transaction includes contingent or non-cash
consideration, the parties agree to negotiate in good faith with respect to the
fair valuation of such consideration.
SECTION THREE
BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer hereby represents and warrants to Ariel as follows:
(a) Buyer is a corporation duly incorporated, validly existing and in
good standing under the laws of the Commonwealth of Virginia;
(b) Buyer has full corporate power and authority to execute, deliver
and perform its obligations under this Agreement;
(c) this Agreement has been duly authorized, executed and delivered by
Buyer and constitutes the legal, valid and binding obligation of Buyer,
enforceable against Buyer in accordance with its terms;
(d) the execution, delivery and performance of this Agreement by Buyer
will not (i) conflict with or result in any breach of any provision of the
Articles of Incorporation or bylaws of Buyer, (ii) violate any requirement of
law or any existing mortgage, contract, lease, indenture or agreement binding on
Buyer or Buyer's property or (iii) result in the creation or imposition of any
lien on any of the properties or assets of Buyer pursuant to the provisions of
any of the foregoing;
(e) except for compliance with the requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") and any
applicable reporting requirements under the Exchange Act, no consent of any
other person and no consent, license, permit, approval or authorization of,
exemption by, notice or report to, or registration, filing or declaration with,
any governmental authority is required in connection with the execution,
delivery or performance of this Agreement by Buyer. Buyer agrees promptly to
file a Premerger Notification and Report Form under the HSR Act with respect to
the transactions contemplated herein; and
(f) Buyer is an accredited investor (within the meaning of Rule 501
under the Securities Act of 1933, as amended), and is purchasing the Purchased
Shares for investment and not with a present intent to conduct a distribution
thereof.
Page 38 of 44 Pages
<PAGE>
SECTION FOUR
ARIEL'S REPRESENTATIONS AND WARRANTIES
Ariel hereby represents and warrants to Buyer as follows:
(a) Ariel is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Illinois, and a registered
investment adviser under the Investment Advisers Act of 1940, as amended;
(b) Ariel has full corporate power and authority to execute, deliver
and perform its obligations under this Agreement;
(c) this Agreement has been duly authorized, executed and delivered by
Ariel and constitutes the legal, valid and binding obligation of Ariel,
enforceable against Ariel in accordance with its terms;
(d) the execution, delivery and performance of this Agreement by Ariel
will not (i) conflict with or result in any breach of any provision of the
Certificate of Incorporation or bylaws of Ariel, (ii) violate any requirement of
law or any existing mortgage, contract, lease, indenture or agreement binding on
Ariel or Ariel's property or (iii) result in the creation or imposition of any
lien on any of the properties or assets of Ariel pursuant to the provisions of
any of the foregoing;
(e) except for any applicable reporting requirements under the Exchange
Act, no consent, license, permit, approval or authorization of, exemption by,
notice or report to, or registration, filing or declaration with, any
governmental authority is required in connection with the execution, delivery or
performance of this Agreement by Ariel; and
(f) to the best of Ariel's knowledge: Ariel's Clients are the legal and
beneficial owners of the respective Purchased Shares to be sold by them
hereunder, with good and valid title thereto, free and clear of any and all
mortgages, liens, encumbrances, charges, claims, restrictions, pledges, security
interests or impositions of any kind thereon or in the proceeds thereof and,
upon Buyer's payment of the Purchase Price therefor, good and valid title to the
Purchased Shares will pass to Buyer.
SECTION FIVE
CONDITIONS PRECEDENT TO THE OBLIGATIONS OF BUYER
The obligations of Buyer to consummate the purchase of the Purchased
Shares as contemplated herein are subject to the satisfaction or waiver by Buyer
at or prior to the Closing of the following conditions precedent:
(a) No Litigation. No investigation, suit, action or other proceeding
shall be pending before any court or governmental agency that seeks restraint,
prohibition, damages or other relief in connection with this Agreement or the
consummation of the transactions contemplated hereby.
(b) Antitrust Filings. In the reasonable opinion of Buyer, all
necessary requirements of the HSR Act and the regulations promulgated thereunder
Page 39 of 44 Pages
<PAGE>
shall have been complied with, and any "waiting period" applicable to the
transactions contemplated by this Agreement which are imposed by such statute or
regulations shall have expired prior to the Closing Date or shall have been
terminated by the appropriate agency.
The parties agree that if, as of any proposed Closing Date when the
conditions precedent to Closing would otherwise be satisfied, Buyer's proposed
purchase of the Purchased Shares would not then be permitted under Exchange Act
Rule 10b-13, the Closing Date shall be postponed as necessary to permit Closing
in compliance with such Rule (subject, in any event, to the provisions of
Section 1(d) hereof related to the tender of the Purchased Shares into a tender
offer under certain circumstances, and to the termination provisions of Section
8 hereof).
SECTION SIX
MUTUAL ACKNOWLEDGEMENTS
In executing this Agreement, Ariel has acted as investment adviser for
Ariel's Clients, and not with the purpose or effect of changing or influencing
the control of the Corporation, nor in connection with or as a participant in
any transaction having such purpose or effect. The parties agree that Ariel and
Ariel's Clients have reserved all of their respective rights with respect to,
and have no agreement, arrangement or understanding with Buyer relating to, any
Shares of the Corporation other than the Purchased Shares. Without limiting the
foregoing, Ariel and Ariel's Clients shall be free, subject to applicable
securities laws, to acquire or dispose of any additional Shares in their sole
discretion.
SECTION SEVEN
CONFIDENTIALITY
Ariel agrees that, except as may be required by applicable law (based
on the written advice of its outside counsel), until such time that Buyer files
with the SEC a Schedule 13D with respect to its planned acquisition of the
Purchased Shares pursuant to this Agreement or until such time that the
transactions contemplated herein are otherwise publicly announced (other than
through any action by Ariel or its affiliates), Ariel shall keep strictly
confidential from all persons (including, without limitation, the Corporation
and its officers and directors) all information concerning the execution and
delivery of this Agreement and the transactions contemplated herein. Buyer
agrees to file such Schedule 13D with the SEC within 10 days after the date
hereof.
SECTION EIGHT
TERMINATION; EXPENSES
(a) This Agreement may be terminated, and the transactions contemplated
herein may be abandoned at any time prior to the Closing, under the following
circumstances:
(i) by the mutual written consent of Buyer and Ariel; or
(ii) by Ariel, if for any reason the Closing has not occurred
by February 29, 2000; or by Buyer, if the Closing shall not have
Page 40 of 44 Pages
<PAGE>
occurred by May 30, 2000, solely as a result of the failure to satisfy
the conditions precedent to Closing set forth in Section 5(a) hereof;
provided, however, that the right to terminate this Agreement shall not
be available to any party whose failure to fulfill its obligations
hereunder has been the cause of, or has resulted in, the failure of
Closing to occur on or before such date.
(b) In the event of a termination of this Agreement by either party
hereto pursuant to this Section 8, written notice thereof shall promptly be
given to the other party and this Agreement shall thereupon terminate and be of
no further force or effect; provided, however, that the termination of this
Agreement shall not relieve either party from any liability to the other for any
breach of its obligations hereunder.
(c) Each party shall be responsible for and shall pay all of its own
expenses in connection with the transactions contemplated herein; provided,
however, that if this Agreement is terminated by Ariel pursuant to Section
8(a)(ii) hereof, Buyer shall reimburse Ariel, promptly upon demand, for all of
Ariel's actual out-of-pocket expenses incurred in connection with the
transactions contemplated in this Agreement (including, without limitation,
Ariel's reasonable attorneys' fees). In addition, Buyer agrees to indemnify and
hold Ariel harmless from and against any and all out-of-pocket costs and
expenses (including, without limitation, Ariel's reasonable attorneys' fees)
incurred by Ariel in connection with the investigation and defense of any third
party claims, proceedings or litigation related to the matters that are the
subject of this Agreement.
SECTION NINE
ENTIRE AGREEMENT
This Agreement constitutes the entire agreement between the parties and
supersedes any prior written or oral understandings, agreements or conditions.
No change, modification, amendment, or addition will be valid unless it is in
writing and signed by the party against whom enforcement of any change,
modification, amendment, or addition is assigned.
SECTION TEN
PARTIES BOUND; ASSIGNMENT
All covenants, agreements, representations and warranties set forth in
this Agreement are binding on and inure to the benefit of the successors and
assigns of the parties. Each party hereto agrees not to assign (by operation of
law or otherwise) this Agreement or any of its rights or obligations hereunder
without the express written consent of the other party hereto; provided,
however, that Buyer may assign any of its rights under this Agreement to any
affiliate of Buyer (it being understood that no such assignment shall relieve
Buyer of any of its obligations hereunder).
SECTION ELEVEN
GOOD FAITH; SPECIFIC PERFORMANCE
The parties have entered into this Agreement, and will perform their
respective obligations hereunder, in good faith intending to be legally bound.
The parties agree that irreparable harm would occur in the event any of the
provisions of this Agreement were not performed in accordance with their terms
Page 41 of 44 Pages
<PAGE>
and that money damages would not be an adequate remedy for any such breach.
Accordingly, the parties agree that they shall be entitled to specific
performance in addition to any other remedy at law or in equity in the event of
a breach of this Agreement.
SECTION TWELVE
GOVERNING LAW
This Agreement shall be construed and enforced in accordance with the
laws of the Commonwealth of Virginia, without regard to the conflicts of laws
provisions thereof.
[Remainder of this page intentionally left blank]
Page 42 of 44 Pages
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
ARIEL: BUYER:
ARIEL CAPITAL MANAGEMENT, INC. CHESAPEAKE CORPORATION
By: /s/ Franklin L. Morton By: /s/ Andrew J. Kohut
---------------------- --------------------
Title: Senior Vice President Title: Senior Vice President
Page 43 of 44 Pages
EXHIBIT 3
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(f) promulgated under the Securities
Exchange Act of 1934, as amended, the persons names below agree to the joint
filing on behalf of each of them a Statement on Schedule 13D (including
amendments thereto) with regard to the common stock of Shorewood Packaging
Corporation, and further agree that this Joint Filing Agreement be included as
an Exhibit to such joint filings. In evidence thereof, the undersigned, being
duly authorized, hereby execute this agreement as of the 29th day of November,
1999.
Date: November 29, 1999 CHESAPEAKE CORPORATION
By: /s/ J. P. Causey Jr.
------------------------
Name: J. P. Causey Jr.
Title: Senior Vice President,
Secretary and General Counsel
Date: November 29, 1999 SHEFFIELD, INC.
By: /s/ J. P. Causey Jr.
------------------------
Name: J. P. Causey Jr.
Title: Vice President and Secretary
Page 44 of 44 Pages
