SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Amendment No. 1)
SHOREWOOD PACKAGING CORPORATION
(Name of Subject Company)
SHOREWOOD PACKAGING CORPORATION
(Name of Person(s) Filing Statement)
Common Stock, Par Value $0.01 Per Share
(Title of Class of Securities)
825229107
(CUSIP Number of Class of Securities)
Andrew N. Shore, Esq.
Vice President, General Counsel and Secretary
Shorewood Packaging Corporation
277 Park Avenue
New York, New York 10172
Telephone: (212) 371-1500
(Name, Address and Telephone Number of Person Authorized to Receive
Notice and Communications on Behalf of the Person(s) Filing Statement).
With a Copy to:
Jeffrey W. Tindell, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022-3897
Telephone: (212) 735-3000
Facsimile: (212) 735-2000
Shorewood Packaging Corporation, a Delaware corporation ("Shorewood"),
hereby amends and supplements its Solicitation/Recommendation Statement on
Schedule 14D-9 initially filed with the Securities and Exchange Commission
on December 16, 1999, relating to the offer (the "Offer") by Sheffield,
Inc., a Delaware corporation and a wholly owned subsidiary of Chesapeake
Corporation, a Virginia corporation, to purchase all of the issued and
outstanding common stock, par value $0.01 per share, of Shorewood,
including the associated rights to purchase preferred stock issued pursuant
to the Rights Agreement, dated as of June 12, 1995, between Shorewood and
The Bank of New York, as Rights Agent.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
Item 9 is hereby amended and supplemented as follows:
Exhibit No. Description
----------- -----------
18 Stockholders and Registration Rights Agreement dated as of
October 30, 1998 among Shorewood, Leonard Verebay and Eric
Kaltman.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete
and correct.
SHOREWOOD PACKAGING CORPORATION
By: /s/ Andrew N. Shore
--------------------------------
Name: Andrew N. Shore
Title: Vice President, General
Counsel and Secretary
Dated: December 17, 1999
Exhibit 18
STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT
STOCKHOLDERS AND REGISTRATION RIGHTS AGREEMENT (the "Agreement")
dated as of October 30, 1998, by and among the signatories listed on the
signature page of this Agreement (each, a "Stockholder" and, collectively,
the "Stockholders"), and Shorewood Packaging Corporation, a Delaware
corporation (the "Company").
W I T N E S S E T H:
WHEREAS, pursuant to the terms of a Purchase and Sale Agreement
(the "Purchase Agreement") dated October 30, 1998 among the Company and the
Sellers, the Company is issuing to the Stockholders an aggregate of
1,000,000 shares (the "Shares"), of the Company's common stock, par value
$.01 per share (the "Common Stock"); and
WHEREAS, it is a condition precedent to the consummation of the
transactions contemplated by the Purchase Agreement that the Stockholders and
the Company enter into this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, it is hereby agreed as follows:
ARTICLE I. INVESTMENT UNDERTAKINGS OF STOCKHOLDERS
In consideration of the Stockholders' receipt of the Shares under
the Purchase Agreement, each Stockholder hereby represents, warrants and
covenants with the Company as follows:
Section 1.1 No Third Party Interest. No other person or entity has
any direct or indirect beneficial interest in the Shares to be received by
such Stockholder under the Purchase Agreement.
Section 1.2 Unregistered Securities. Such Stockholder understands
and agrees that (i) the Shares are "restricted securities" under the
Securities Act of 1933, as amended (the "Securities Act"), because they are
being acquired from the Company in a transaction not involving a public
offering, and that, under such laws and applicable regulations, such
securities may be resold without registration under the Securities Act only
in certain limited circumstances. In this connection, each Stockholder
represents that he or she is familiar with and understands the resale
limitations imposed upon him or her by Rule 144 under the Securities Act.
Section 1.3 Purchase for Investment, etc. That: (i) he or she is
acquiring the Shares for his or her own account for investment only and not
with a view to, or for sale in connection with, a distribution within the
meaning of the Securities Act; (ii) he or she has no present intention of
selling or otherwise disposing of any portion of the Shares being acquired
by such Stockholder; (iii) he or she is familiar with the financial
condition, product lines and present and prospective business affairs and
prospects of the Company; (iv) he or she, or his or her representatives or
agents, has had access to all information regarding the Company and its
present and prospective business, assets, liabilities and financial
condition and the backgrounds of the principals of the Company as he or she
has deemed material to making the decision to acquire the Shares and has
been afforded the opportunity to ask questions of and receive answers from
the Company's senior management concerning present and prospective business
prospects of the Company; (v) he or she has fully considered this
information in valuing the Company and assessing the merits of the
transactions contemplated by this Agreement and the Purchase Agreement;
(vi) he or she recognizes that an investment in the Shares involves
special, speculative and substantial risk because, among other things, the
Company may pursue risky business strategies, the Shares are subject to
significant legal and contractual restrictions upon resale and, in any
case, there may be not a future market for resale of the Shares; (vii) he
or she is able to fend for himself or herself in the transactions
contemplated by this Agreement and the Purchase Agreement, and is, on his
or her own or through his or her professional advisors, knowledgeable in
business and financial matters; specifically, he or she is a senior level
executive in the packaging industry with intimate knowledge of the economic
condition and competitive factors affecting the industry and thus is
uniquely capable of evaluating and has evaluated the affairs and prospectus
of the Company and the merits of an investment in the Shares; (viii) he or
she has made the determination to enter into this Agreement and the
Purchase Agreement based upon his or her own independent evaluation and
assessment of the value of the Company and its present and prospective
business prospects and has not relied on, or been induced to enter into
this Agreement or the Purchase Agreement on account of, any representation
or warranty of any kind or nature, whether oral or written, express or
implied, except for such representations and warranties of the Company as
are specifically set forth in the Purchase Agreement; (ix) he or she is
financially capable of bearing a total loss of his or her investment in the
Shares; and (x) at no time was he or she presented with or solicited by any
publicly issued or circulated newspaper, magazine, mail, radio or
television or any other form of general advertising or solicitation in
connection with the acquisition of the Shares.
Section 1.4 Residency. For purposes of the application of state
securities laws, that he or she is a resident of the state set forth in such
Stockholder's address on the signature page hereto.
Section 1.5 No Governmental Approval. Such Stockholder understands
that no government agency has passed upon such Shares or made any finding
or determination as to the fairness of the investment or any recommendation
or endorsement of such Shares.
ARTICLE II. RESTRICTIONS ON TRANSFER
Section 2.1 Restrictions on Transfer. Each of the Stockholders
hereby covenants to the Company and agrees that, from the date hereof until
the second anniversary of the Closing Date (the "Restricted Period"), he or
she will not transfer, sell, assign, hypothecate, encumber, pledge, grant a
security interest in, dispose of or otherwise alienate for consideration,
by gift or otherwise, any of the Shares, other than according to the terms
of this Agreement or with the prior consent of the Board of Directors of
the Company. Any transfer of Shares in violation of this Section 2.1,
whether voluntary or involuntary, shall be void and of no force and effect
and shall transfer no right, title, or interest in or to those Shares to
the purported transferee, buyer, assignee, pledgee, or encumbrance holder
of such Shares.
Section 2.2 Exceptions to Restrictions on Transfer. (a) The
restrictions on transfers of the Shares provided for in Section 2.1 shall
not prohibit the transfer by any Stockholder of any or all of the Shares
owned by such Stockholder (i) to any person by his or her last will and
testament duly admitted to probate, or pursuant to applicable laws of
intestacy, (ii) to the parents, spouse, siblings, nieces or nephews of the
Stockholder or his or her spouse or a trust for the benefit of any or all
of such persons, (iii) to one or more of his or her lineal descendants or
their respective spouses or to a trustee or guardian for the benefit of
such lineal descendant(s) or his or her spouse, (iv) into a trust for the
benefit of such Stockholder and the members of his or her immediate family,
(v) to any affiliate of such Stockholder directly or indirectly
wholly-owned and controlled by him or her or (vi) to any other Stockholder;
provided, however, that in all cases, the Shares so transferred will
continue to be subject to all of the terms, covenants and conditions of
this Agreement (other than Article IV) except that the provisions of this
Article II shall not apply to such Shares if the Restricted Period has
expired or if the provisions of this Article II have terminated pursuant to
Section 5.1 hereof.
(b) In each such case, the Stockholder will, prior to or
simultaneously with the transfer, inform the transferee of, and make
available a copy of, this Agreement. Acceptance by the transferee of the
Shares being transferred shall be deemed an agreement by the transferee to
be bound by all of the terms, covenants and provisions of this Agreement to
the same extent as if an initial signatory hereto (other than Article IV).
Additionally, the Stockholder shall cause the transferee to execute and
deliver an instrument agreeing to be bound by this Agreement. Unless and
until the transferee delivers the instrument, the Company shall have the
right to withhold the distribution of any dividends or distributions in
respect of the transferred Shares to such transferee and to pay the same to
the transferor of such Shares in full and complete satisfaction of the
Company's obligation to pay or otherwise make such dividends or
distributions. For purposes of this Agreement, any assignee or transferee
of Shares pursuant to this Section 2.2 shall thereafter be deemed a
"Stockholder" for all purposes of this Agreement (other than Article IV).
Section 2.3 Agreement Available for Inspection. An original copy
of this Agreement duly executed by the Company and each Stockholder shall
be delivered to the Secretary of the Company and maintained by the
Secretary at the principal office of the Company available for inspection
by any authorized person requesting to see it.
Section 2.4 Legend on Shares. Each certificate representing Shares
shall bear the following legends:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY APPLICABLE STATE SECURITIES LAW, AND NO
INTEREST THEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED,
PLEDGED OR OTHERWISE TRANSFERRED UNLESS (i) THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND APPLICABLE
STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION INVOLVING
SAID SECURITIES, (ii) THIS CORPORATION RECEIVES AN OPINION OF
LEGAL COUNSEL FOR THE HOLDER OF THESE SECURITIES SATISFACTORY
TO THIS CORPORATION STATING THAT SUCH TRANSACTION IS EXEMPT
FROM REGISTRATION, OR (iii) THIS CORPORATION OTHERWISE
SATISFIES ITSELF THAT SUCH TRANSACTION IS EXEMPT FROM
REGISTRATION.
ADDITIONALLY, THE SECURITIES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO THE PROVISIONS OF A STOCKHOLDERS AND
REGISTRATION RIGHTS AGREEMENT, DATED ____, 1998, BY AND
BETWEEN THIS CORPORATION, THE HOLDER HEREOF AND CERTAIN OTHER
PARTIES RESTRICTING THE TRANSFER THEREOF. A COPY OF SAID
AGREEMENT MAY BE EXAMINED AT THE PRINCIPAL OFFICE OF THE
CORPORATION.
The second legend set forth above shall be removed and the
Company shall issue a certificate without such legend to the holder of the
Shares to which it is stamped upon (i) the expiration of the Restricted Period,
or (ii) the termination of this Agreement or the provisions of this Article II
pursuant to Section 5.1 hereof.
Section 2.5 Rights as a Shareholder. Except as set forth in
Section 2.1, each Stockholder shall have full rights as a shareholder of
the Company with respect to the Shares owned of record by him or her
including, without limitation, the right to vote such Shares and the right
to receive dividends and non-cash distributions with respect to such
Shares.
Section 2.6 Adjustments to Number of Shares. This Article II shall
apply to the Shares and to any stock or other securities issued on account
thereof, i.e., as a result of a stock split or stock dividend, and to any
stock or other securities into which such Shares shall have hereafter been
changed, converted or exchanged, unless such securities have been received
as the result of a Capital Transaction (as defined in Section 5.1 hereof).
ARTICLE III. REGISTRATION RIGHTS
Section 3.1 Certain Definitions. As used in this Article III, the
following initially capitalized terms shall have the following meanings:
Person: A corporation, an association, a limited liability
company, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.
Registrable Securities: The Shares and any stock or other
securities into which such Shares shall have hereafter been changed,
converted or exchanged and all securities issued on account thereof, i.e.,
as a result of a stock split or stock dividend, which are held by the
Stockholders; provided, however, that any such securities shall cease to be
Registrable Securities with respect to a proposed offer or sale thereof (i)
when a registration statement with respect to the sale of such securities
shall have become effective under the Securities Act and such securities
shall have been disposed of in accordance with the plan of distribution set
forth in such registration statement, or (ii) to the extent that such
securities, in the opinion of counsel to the Company, are permitted to be
distributed pursuant to Rule 144(k) or otherwise pursuant to Rule 144
without regard to any volume limitation (or if the volume limitation would
permit distribution and sale of all securities of the Company held by a
Stockholder and all other Persons with whom sales of the securities of the
Company would be aggregated under Rule 144 in a single three-month period).
Registration Expenses: All expenses incident to the Company's and
the Stockholders' performance of or compliance with this Article III,
including without limitation all registration and filing fees, including
fees with respect to filings required to be made with the National
Association of Securities Dealers, Inc., fees and expenses of compliance
with securities or blue sky laws, costs of preparing registration
statements, prospectuses and supplements thereto, including, without
limitation, all word processing, duplicating and printing expenses,
messenger, telephone and delivery expenses, and fees and disbursements of
counsel for the Company and of the Company's independent certified public
accountants (including the expenses of any special audit and "cold comfort"
letters required by or incident to such performance); provided however,
that Registration Expenses shall not include (i) any underwriting discounts
and selling commissions applicable to the sale of Registrable Securities;
(ii) any fees of legal counsel for the sellers of Registrable Securities;
or (iii) any transfer taxes applicable to the sale of Registrable
Securities.
Rule 144: Rule 144 promulgated under the Securities Act, or any
successor rule to similar effect.
SEC: The United States Securities and Exchange Commission.
Termination Date: The date the Stockholders no longer hold any
Registrable Securities.
Section 3.2 Mandatory Registration.
(a) At any time following the expiration or termination
of the Restricted Period and prior to the Termination Date (the
"Registration Rights Period"), upon written demand (a "Demand") for
registration by the holders of a minimum of 50% of the Registrable
Securities, the Company shall promptly give written notice ("Notice of
Demand") of the Demand to each Person who then holds Registrable
Securities. Each recipient of a Notice of Demand may, for a period of
thirty (30) days after the giving of the Notice of Demand, deliver to the
Company a notice (a "Response Demand") demanding registration of the
Registrable Securities held by such recipient.
(b) In the event of a Demand pursuant to Section 3.2(a),
the Company shall prepare and file with the SEC as soon as commercially
practicable, but in no event later than sixty (60) days after the date on
which the Demand is received, a Registration Statement on Form S-3 or
equivalent form with respect to all Registrable Securities for which demand
for registration has been made pursuant to a Demand or Response Demand and
shall comply with the further registration procedures described in Section
3.4 below.
(c) The Company may include in the registration pursuant
to this Section 3.2 securities issued in connection with any acquisition
not otherwise registered on an S-4 Registration Statement.
(d) Notwithstanding anything contained in this Section
3.2, the Company shall not be required to prepare and file a registration
statement in accordance with this Section 3.2 more than once.
Section 3.3 Incidental Registration.
(a) Right to Include the Registrable Securities. If the
Company, at any time before the Termination Date, proposes to register
securities for sale for its own account under the Securities Act by
registration on Forms S-1, S-2 or S-3 or any successor or similar form(s)
(but excluding registrations on Forms S-4 or S-8 or any successor or
similar forms), the Company will give at least ten (10) business days
written notice each such time to the Stockholders of its intention to do
so. Upon the written request of a Stockholder holding Registrable
Securities (specifying the intended method of disposition of the
Registrable Securities and exercisable by each Stockholder only twice
before the Termination Date), made within 10 business days after the
receipt of any such notice, the Company will include in its proposed
registration all Registrable Securities held by such Stockholder on the
same terms and conditions as the securities of other stockholders
participating in such registration will be included, subject to the
priorities set forth in Section 3.3(b) below, if any. If the Company
thereafter determines for any reason not to register or to delay
registration of the Company's offering of its securities, the Company may,
at its election, give written notice of such determination to the
Stockholders who chose to participate in such registration and, thereupon,
(i) in the case of a determination not to register, shall be relieved of
the obligation to register such Registrable Securities in connection with
such registration (but not from any obligation of the Company to pay the
Registration Expenses in connection therewith or to register Registrable
Securities in the future), and (ii) in the case of a determination to delay
registration, shall be permitted to delay registering any Registrable
Securities for the same period as the delay in registration of such other
securities. The Company will pay all Registration Expenses in connection
with the registration of Registrable Securities requested pursuant to this
Section 3.3. All other cost and expenses incurred by the Stockholders in
connection with such registration will be borne by the Stockholders on the
basis of the percentage that the Registrable Securities which are being
offered by each of them bears to the total number of Registrable Securities
sought to be registered in such negotiation.
(b) Priority in Incidental Registration Rights. If the
managing underwriter(s) in connection with a registration advise(s) the
Company (and the other stockholders participating therein) in writing that
in their good faith opinion such offering would be adversely affected by
the inclusion therein of the total number of Registrable Securities, the
Company shall include in such registration: (1) first, all securities the
Company proposes to sell for its own account (the "Company Securities"),
and (2) second, the securities requested to be registered by stockholders
of the Company (including, without limitation, the Stockholders) entitled
to participate in the registration, drawn from them pro rata based on the
number each has requested to be included in such registration.
(c) Limitations; Exceptions. The Company shall not be
required to effect any registration of Registrable Securities under this
Section 3.3 incidental to the registration of any of the securities in
connection with mergers, acquisitions, exchange offers, subscription
offers, dividend reinvestment plans or stock option or other employee
benefit plans.
(d) Number of Incidental Registrations; Effective
Registration Statement. Each Stockholder may exercise his right to
incidental registration under this Section 3.3 only twice before the
Termination Date; provided, that no Stockholder may exercise his right to
incidental registration under this Section 3.3 with respect to less than
the lesser of: (x) 10,000 shares of Common Stock (or Registrable Securities
having a total market value of less than $100,000 if the Registrable
Securities are of any class other than Common Stock), (y) 25% of the total
number of shares of Registrable Securities then held by all Stockholders
and (z) 50% of the total number of shares of Registrable Securities then
held by such Stockholder. Any registration requested pursuant to Section
3.2 or this Section 3.3 shall not be deemed to have been effected and will
not be considered one of the registrations which may be requested by
Stockholders (i) unless a registration statement with respect thereto has
become effective, (ii) if, after it has become effective, it does not
remain effective and available to Stockholders for resale for a period of
at least ninety (90) days (unless the Registrable Securities registered
thereunder have been sold or disposed of prior to the expiration of such
90-day period) or such registration is interfered with by any stop order,
injunction or other order or requirement of the SEC or other governmental
agency or court for any reason and has not thereafter become effective, or
(iii) if, after it has become effective, Stockholders receive notice from
the Company of the happening of any event of the kind described in Section
3.4(e)(ii), (iii) or (iv) or Section 3.4(g) hereof, and are forced to
discontinue disposition of Registrable Securities pursuant to Section
3.5(b) hereof, prior to the expiration of a resale period of at least
ninety (90) days (unless the Registrable Securities registered thereunder
have been sold or disposed of prior to the expiration of such 90-day
period).
Section 3.4 Registration Procedures. Subject to the other terms and
conditions hereof whenever any Stockholder has issued a Demand or a Response
Demand pursuant to Section 3.2 above or has requested an incidental registration
pursuant to Section 3.3 above, the Company shall, as soon as reasonably
possible:
(a) Use its reasonable best efforts to cause the
applicable registration statements to become effective within any
applicable time frames prescribed herein;
(b) Prepare and file with the SEC such amendments and
supplements to such registration statements and the prospectus(es) used in
connection therewith, which prospectus(es) are to be filed pursuant to Rule
424 under the Securities Act, as may be necessary to keep such registration
statements effective for a period of ninety (90) days or until such
securities, in the opinion of counsel to the Company, are permitted to be
distributed pursuant to Rule 144(k) or otherwise pursuant to Rule 144
without regard to any volume limitation (or if the volume limitation would
permit distribution and sale of all securities of the Company held by a
Stockholder in a single three-month period) and comply with the provisions
of the Securities Act with respect to the disposition of all securities
covered by such registration statements during such period in accordance
with the intended methods of disposition by the sellers thereof set forth
in such registration statements or supplements to such prospectuses. In the
event sales of Registrable Securities of the Stockholders are suspended as
provided in Section 3.5(b), the 90-day period during which a registration
statement must be kept effective shall be extended for the total number of
days during which sales are suspended;
(c) Furnish to the Stockholders without charge, such
number of copies of such registration statements, each amendment and
supplement thereto, the prospectus(es) included in such registration
statements, and such other documents as the Stockholders may reasonably
request in order to facilitate the disposition of the Registrable
Securities (the Company consents to the use of such prospectuses or any
amendment or supplement thereto by the Stockholders in connection with the
offering and sale of the Registrable Securities covered by such
prospectuses or any amendment or supplement thereto); and furnish to the
Stockholders, without charge, at least one conformed copy of the
registration statement or statements and any post-effective amendments
thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those
incorporated by reference);
(d) Use its reasonable efforts to register or qualify
such Registrable Securities under such other securities or blue sky laws of
such jurisdictions as the Stockholders reasonably request and do any and
all other acts and things which may be reasonably necessary or advisable to
(i) keep such registration or qualification effective during the period
such registration statement is required to be kept effective and (ii)
enable the Stockholders to consummate the disposition in such jurisdictions
of the Registrable Securities owned by the Stockholders;
(e) Notify the Stockholders, promptly, and if requested,
confirm such advice in writing (i) when a prospectus or any prospectus
supplement or post-effective amendment has been filed, and, with respect to
a registration statement or any post-effective amendment, when the same has
become effective, (ii) of any request by the SEC for amendments or
supplements to a registration statement or related prospectus or for
additional information, (iii) of the existence of material information that
has not been disclosed to the public and included in the registration
statement if it is necessary to amend the registration statement or the
prospectus included in such registration statement, and, at the request of
the Stockholders, the Company will, as soon as reasonably practicable,
prepare a supplement or amendment to such registration statement or
prospectus so that such registration statement or prospectus will not
contain any untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading in light of the
circumstances then existing (provided, that in the case of a shelf
registration on Form S-3 or equivalent form the foregoing shall not
obligate the Company to disclose any fact or circumstance earlier than it
would have been disclosed by the Company in the ordinary course of business
absent this Agreement or any similar obligation or to amend to the
registration statement during any time when the Company's officers and
directors are prohibited from buying or selling the Company's Common Stock
pursuant to the Company's insider trading policy), and (iv) of the
Company's reasonable determination that a post-effective amendment to a
registration statement would be appropriate;
(f) Cause all such Registrable Securities to be listed on
each securities exchange and inter-dealer quotation system on which similar
securities issued by the Company are then listed and pay all fees and
expenses in connection therewith; and
(g) Advise the Stockholders promptly after the Company
shall have received notice or obtained knowledge of (i) the issuance of any
stop order by the SEC suspending the effectiveness of such registration
statements or the initiation or threatening of any proceeding for such
purposes and will use its reasonable efforts to prevent the issuance of any
stop order or to obtain its withdrawal if such stop order should be issued,
or (ii) the suspension of the qualification of any of the Registrable
Securities for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purposes and will promptly use its reasonable
efforts to prevent such suspension or have such suspension lifted if it
should be effected.
Section 3.5 The Stockholders' Covenants.
(a) Each Stockholder shall furnish to the Company in
writing such information relating to him as the Company may reasonably
request in writing in connection with the preparation of registration
statements pursuant to this Agreement, and each Stockholder agrees to
notify the Company as promptly as practicable of any inaccuracy or change
in information he has previously furnished to the Company or of the
happening of any event, in either case as a result of which any prospectus
relating to such registrations contains an untrue statement of a material
fact regarding the Stockholder or the distribution of such Registrable
Securities or omits to state any material fact regarding the Stockholder or
the distribution of such Registrable Securities required to be stated
therein or necessary to make the statements therein not misleading in light
of the circumstances then existing, and to promptly furnish to the Company
any additional information required to correct and update any previously
furnished information or required such that such prospectus shall not
contain, with respect to the Stockholder or the distribution of such
Registrable Securities, an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances then
existing.
(b) Each Stockholder agrees that, upon receipt of any
notice from the Company of the happening of any event of the kind described
in Section 3.4(e)(ii), (iii) or (iv) or Section 3.4(g) hereof, the
Stockholders will forthwith discontinue disposition of such Registrable
Securities covered by such registration statement or prospectus until the
Stockholders' receipt of the copies of the supplemented or amended
prospectus relating to such registration statement or prospectus, or until
it is advised in writing by the Company that the use of the applicable
prospectus may be resumed, and has received copies of any additional or
supplemental filings which are incorporated by reference in such
prospectus, and, if so directed by the Company, the Stockholders will
deliver to the Company all copies, other than permanent file copies then in
the Stockholders' possession, of the prospectus covering the Registrable
Securities current at the time of receipt of such notice.
Section 3.8 Reasonable Investigation. In connection with
the preparation and filing of each registration statement under the
Securities Act pursuant to this Agreement, the Company will give the
Stockholders and their respective counsel and accountants such access to
its books and records and such opportunities to discuss the business of the
Company with its officers and the independent public accountants who have
certified its financial statements as shall be necessary to conduct a
reasonable investigation within the meaning of the Securities Act.
Section 3.7 Indemnification.
(a) Indemnification by the Company. In the event of any
registration of any Registrable Securities under the Securities Act, the
Company will, and hereby does, indemnify and hold harmless, to the fullest
extent permitted by law, each Stockholder against any and all judgments,
fines, penalties, charges, costs, amounts paid in settlement, losses,
claims, damages, liabilities, expenses, or attorney fees, joint or several,
incurred in investigating, preparing or defending any action, claim, suit,
inquiry, proceeding, investigation or appeal taken from the foregoing by or
before any court or governmental, administrative or other regulatory
agency, body or the SEC, whether pending or threatened, whether or not the
Stockholder is or may be a party thereto ("Indemnified Damages"), to which
such Stockholder may become subject under the Securities Act or any other
statute or common law, insofar as any such Indemnified Damages arise out of
or are based upon (i) any untrue statement or alleged untrue statement of a
material fact contained in the registration statement relating to the sale
of such securities or any post-effective amendment thereto or in any filing
made in connection with the qualification of the offering under blue sky or
other securities laws of jurisdictions in which the Registrable Securities
are offered ("Blue Sky Filing"), or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading or (ii) any untrue statement or
alleged untrue statement of a material fact contained in the final
prospectus (as amended or supplemented if the Company shall have filed with
the SEC any amendment thereof or supplement thereto) if used within the
period during which the Company is required to keep the registration
statement to which such prospectus relates current, or the omission or
alleged omission to state therein (if so used) a material fact necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided, however, that the
indemnification agreement contained herein shall not apply to such
Indemnified Damages to any Stockholder arising out of, or based upon, any
such untrue statement or alleged untrue statement, or any such omission or
alleged omission, if such statement or omission: (i) was made in reliance
upon and in conformity with written information furnished to the Company by
the Stockholder for use in connection with preparation of the registration
statement, any prospectus contained in the registration statement, any such
amendment or supplement thereto or any Blue Sky Filing; or (ii) was
included in a registration statement, prospectus contained therein or any
amendment or supplement thereto, and prior to the use thereof, the Company
had given notice to the Stockholder of the happening of one or more events
of the kind described in Section 3.4(e)(ii), (iii) or (iv) or Section
3.4(g) hereof. Furthermore, the indemnification agreement contained herein
shall not apply to any Indemnified Damages to any Stockholder arising out
of, or based upon, the Stockholder's or any of his representatives',
failure to deliver a prospectus, including any amendments or supplements
thereto, in connection with any sale thereunder in accordance with the
rules and regulations of the SEC (provided that the Stockholder had notice
of any such amendment or supplement and received a copy of such amendment
or supplement in accordance with the terms of this Agreement).
(b) Indemnification by the Stockholders. Each Stockholder
will, if Registrable Securities are included in the securities to which
such registration is being effected, indemnify and hold harmless (in the
same manner and to the same extent as set forth in subdivision (a) of this
Section 3.7) the Company, its officers and directors and each officer of
the Company and each other Person, if any, who controls the Company within
the meaning of the Securities Act with respect to any untrue statement or
alleged untrue statement in, or omission or alleged omission from, such
registration statement, any prospectus contained therein, or any amendment
or supplement thereto, if such statement or omission (i) arises from
information relating to any Stockholder and was made in reliance upon
written information any Stockholder furnished to the Company for use in the
preparation of such registration statement, prospectus, amendment or
supplement on Blue Sky Filing, or (ii) was included in a registration
statement, prospectus contained therein or any amendment or supplement
thereto, and prior to the use thereof, the Company had given notice to the
Stockholders of the happening of one or more events of the kind described
in Section 3.4(e)(ii), (iii) or (iv) or Section 3.4(g) hereof. Such
indemnity shall remain in full force and effect, regardless of any
investigation made by or on behalf of the Company or any such director,
officer or controlling Person and shall survive the transfer of such
securities by the Stockholders. The Stockholders' indemnity as described in
this Section 3.7(b) shall be limited to the dollar amount of the proceeds
of the Registrable Securities actually sold by each Stockholder pursuant to
such registration statement.
(c) Notices of Claims, Etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section
3.7, such indemnified party will, if a claim in respect thereof is to be
made against an indemnifying party, give written notice to the latter of
the commencement of such action, provided that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subdivisions of
this Section 3.7, except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. In case any such action
is brought against an indemnified party, the indemnifying party shall be
entitled to participate in and, unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim, to assume the
defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party shall not be liable to such
indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable
costs of investigation. The indemnified party shall cooperate fully with
the indemnifying party in connection with any negotiation or defense of any
such action or claim by the indemnifying party and shall furnish to the
indemnifying party all information reasonably available to the indemnified
party which relates to such action or claim. The indemnifying party shall
keep the indemnified party fully apprised at all times as to the status of
the defense or any settlement negotiations with respect thereto. If the
indemnifying party elects to defend any such action or claim, then the
indemnified party shall be entitled to participate in such defense with
counsel of its choice at its sole cost and expense. If the indemnifying
party does not assume such defense, the indemnified party shall keep the
indemnifying party apprised as to the status of the defense; provided,
however, that the failure to keep the indemnifying party so informed shall
not affect the obligations of the indemnifying party hereunder. No
indemnifying party shall be liable for any settlement of any action, claim
or proceeding effected without its written consent, provided, however, that
the indemnifying party shall not unreasonably withhold, delay or condition
its consent. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any
settlement or other compromise which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified
party of a release from all liability in respect to such claim or
litigation. Following indemnification as provided for hereunder, the
indemnifying party shall be subrogated to all rights of the indemnified
party with respect to all third parties, firms or corporations relating to
the matter for which indemnification has been made.
(d) Indemnification Payments. The indemnification
required by this Section 3.7 shall be made by periodic payments of the
amount thereof during the course of the investigation or defense, as and
when bills are received or Indemnified Damages are incurred.
(e) Contribution. If the indemnification provided for in
this Section 3.7 shall for any reason be held by a court to be unavailable
to an indemnified party under subparagraph (a) or (b) hereof in respect of
any Indemnified Damages, then, in lieu of the amount paid or payable under
subparagraph (a) or (b) hereof, the indemnified party and the indemnifying
party under subparagraph (a) or (b) hereof shall contribute to the
aggregate Indemnified Damages, in such proportion as is appropriate to
reflect the relative fault of the indemnifying party and the indemnified
party with respect to the statements or omissions which resulted in such
Indemnified Damages, as well as any other relevant equitable
considerations. No Person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. The obligations of the Stockholders to contribute as
provided in this subparagraph (e) shall be in proportion to the relative
value of his Registrable Securities covered by such registration statement
in relation to all securities covered by such registration statement. In
addition, no Person shall be obligated to contribute hereunder any amounts
in payment for any settlement of any action or claim effected without such
Person's consent, which consent shall not be unreasonably withheld.
(f) Other Rights; Liabilities. The indemnity agreements
contained herein shall be in addition to (i) any cause of action or similar
right of the indemnified party against the indemnifying party or others,
and (ii) any liabilities the indemnifying party may be subject to pursuant
to the law.
ARTICLE IV. BOARD REPRESENTATION
The Stockholders, collectively, shall have the right to
designate either Leonard Verebay or Eric Kaltman, as they may choose, for
election to the Company's board of directors by such board at the closing
of the transactions contemplated by the Purchase Agreement, to serve until
the next annual meeting of the stockholders of the Company. Thereafter, if
any one of Leonard Verebay or Eric Kaltman (i) holds at least 400,000
shares of Common Stock (which threshold number of shares shall
automatically be adjusted from time to time to reflect increases, decreases
or exchanges in, or the distribution of additional or different securities
in respect of, the Common Stock as a result of any recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other
similar transaction) and (ii) is either an employee of the Company or is
subject to the noncompetition covenants of Article VII of the Purchase
Agreement or Section 7 of the Employment Agreement of even date herewith
between him and the Company ((i) and (ii) above, the "Board
Qualifications"), the Company agrees to cause such Stockholder to be
included in management's slate of nominees for election at each annual
meeting of the stockholders of the Company at the expiration of his term,
for so long as such Stockholder meets the Board Qualifications. If,
however, both Leonard Verebay and Eric Kaltman meet the Board
Qualifications, the Stockholders shall choose one of them to be nominated
for election to the Company's Board of Directors and the Company agrees to
cause such Stockholder so chosen to be included in management's slate of
nominees for election at each annual meeting of the stockholders of the
Company at the expiration of his term, for so long as such Stockholder
meets the Board Qualifications. Further, for so long as the Stockholders
collectively own in the aggregate not less than 800,000 shares of Common
Stock (which threshold number of shares shall automatically be adjusted
from time to time to reflect increases, decreases or exchanges in, or the
distribution of additional or different securities in respect of, the
Common Stock as a result of any recapitalization, reclassification, stock
dividend, stock split, reverse stock split or other similar transaction),
the Company agrees to cause whichever of Leonard Verebay and Eric Kaltman
is not a member of the Company's Board of Directors to be invited to attend
meetings of the Company's Board of Directors as an observer (so long as he
is either an employee of the Company or is subject to the noncompetition
covenants of Article VII of the Purchase Agreement or Section 7 of the
Employment Agreement of even date herewith between him and the Company),
unless the Board of Directors of the Company determines as to any
particular meeting or meetings that considerations of confidentiality make
such attendance inappropriate.
ARTICLE V. MISCELLANEOUS
Section 5.1 Termination. This Agreement shall terminate
in the event of the bankruptcy or insolvency of the Company. The provisions
of solely Articles II and IV of this Agreement shall terminate upon the
occurrence of a Capital Transaction (as defined below) or upon any Change
in Control (as defined below). Upon any termination of this Agreement or
Articles II and IV as provided above, the Company shall, if a Stockholder
so requests, remove from each certificate representing shares of Common
Stock then owned by the Stockholder any legend which refers to this
Agreement and/or any of the restrictions on transfer contained herein. For
purposes of this Section 5 .1, "Capital Transaction" means, with respect to
the Company the transaction underlying any of the following events: (i) the
stockholders of the Company approve a merger, consolidation or other
combination of the Company with any other company, other than (1) a merger,
consolidation or other combination which would result in the voting
securities of the Company outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 50% of the combined
voting power of the voting securities of the Company or such surviving
entity outstanding immediately after such merger, consolidation or other
combination or (2) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no
"person" (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) acquires
more than 50% of the combined voting power of the Company's then
outstanding securities; or (ii) the stockholders of the Company approve an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets and properties to any Person (as
defined in Article III hereof) which is not an Affiliate (as defined below)
of the Company; or (iii) the stockholders of the Company approve any
compulsory share exchange pursuant to which the Common Stock is converted
into other securities, cash or property of another Person which is not an
Affiliate of the Company or (iv) the Board of Directors of the Company
approves any exchange or tender offer for outstanding Common Stock by any
Person which is not an Affiliate of the Company if, upon consummation of
such exchange or tender offer, the offeror would become the beneficial
owner of fifty percent (50%) or more of the voting stock of the Company.
For purposes of this Section 5.1, "Affiliate" means a Person that directly,
or indirectly through one or more intermediaries, controls, is controlled
by, or is under common control with, the Person referred to, and in this
definition, "control" means the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of a
Person, whether through ownership of securities, by contract, or otherwise.
For purposes of this Section 5.1, "Change in Control" means (i) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act) (other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any
corporation owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportion as their ownership of stock of
the Company), is or becomes the "beneficial owner" (as defined in Rule
13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 40% or more of the combined voting power of the
Company's then outstanding securities without the approval of the Board of
Directors of the Company; (ii) during any period of two consecutive years,
individuals who at the beginning of such period constitute the Board, and
any new director whose election by the Board or nomination for election by
the Company's stockholders was approved by a vote of at least two-thirds
(2/3) of the directors then still in office who either were directors at
the beginning of the period or whose election or nomination for election
was previously so approved cease for any reason to constitute at least a
majority thereof, or (iii) if Marc Shore, together with his immediate
family members and all Affiliates of Marc Shore and/or his immediate family
members, either individually or acting as a group, cease to own at least
15% of the outstanding Common Stock of the Company.
Section 5.2 Binding Effect; Assignment. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the parties
hereto and their respective successors and permitted assigns. The Company
may not assign its obligations hereunder except that the Company shall at
any time upon notice to the Stockholders assign all or a portion of its
rights and duties hereunder (to the extent the same have not terminated
pursuant to Section 5.1 above) to (i) an entity which results from any
merger, consolidation or other reorganization to which the Company is the
non-surviving party or (ii) a buyer of all or substantially all of the
Company's assets, provided that, with respect to Article III above, the
assignee or its parent is publicly traded and the assignee or its parent
shall agree in writing to fully and faithfully perform all of the Company's
obligations hereunder. Without the prior written consent of the Company, no
Stockholder may assign his rights hereunder or otherwise provide to any
third party the benefits granted to such Stockholder hereunder.
Section 5.3 Severability. If any term or provision of this
Agreement is held by a court of competent jurisdiction to be invalid, void,
or unenforceable, the remainder of the terms and provisions set forth
herein shall remain in full force and effect and shall in no way be
affected, impaired or invalidated, and the parties hereto shall use their
best efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term or
provision.
Section 5.4 Further Assurances. Subject to the specific terms of
this Agreement, each of the parties hereto shall make, execute, acknowledge
and deliver such other instruments and documents, and take all such other
actions, as may be reasonably required in order to effectuate the purposes
of this Agreement and to consummate the transactions contemplated hereby.
Section 5.5 Waivers, Etc. No failure or delay on the part of
either party hereto (or the intended third party beneficiaries referred to
herein) in exercising any power or right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any such right
or power, or any abandonment or discontinuance of steps to enforce such a
right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. No modification or waiver of any
provision of this Agreement nor consent to any departure therefrom shall in
any event be effective unless the same shall be in writing, and then such
waiver or consent shall be effective only in the specific instance and for
the purpose for which given.
Section 5.6 Entire Agreement. This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof. The
section headings contained in this Agreement are solely for the purpose of
reference, and shall not in any way affect the meaning or interpretation of
this Agreement.
Section 5.7 Counterparts. For the convenience of the parties, this
Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original but all of which together shall be one
and the same instrument.
Section 5.8 Notices. All notices, consents, demands, waivers, and
other communications under this Agreement must be in writing and will be
deemed to have been duly given when (a) delivered by hand (with written
confirmation of receipt), (b) sent by electronic facsimile equipment,
provided that a copy is mailed by registered mail, return receipt
requested, or (c) when received by the addressee, if sent by a nationally
recognized overnight delivery service (receipt requested), in each case to
the appropriate addresses and facsimile numbers set forth below (or to such
other addresses and telecopier numbers as a party may designate by notice
to the other parties):
If to the Company: Shorewood Packaging Corporation
277 Park Avenue
New York, New York 10172
Attention: Andrew Shore, Vice
President, General Counsel
Facsimile No.: (212) 508-5677
With a copy to: Bryan Cave LLP
245 Park Avenue
New York, New York 10167-0034
Attention: Peter A. Eisenberg, Esq.
Facsimile No.: (212) 692-1900
If to the Stockholders: at the respective addresses set
forth on the signature page hereto
With a copy to: Rubin Baum Levin Constant & Friedman
30 Rockefeller Plaza
New York, New York 10112
Attention: ________________________
Facsimile No.: (212) 698-7825
Section 5.9 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
applicable to contracts made and to be performed in such state without giving
effect to the principles of conflicts of laws.
Section 5.10 Amendments. This Agreement may be amended only by a
written agreement signed by the Company and the Stockholders.
Section 5.11 Blue-Penciling. If any court determines that any
provision of this agreement regarding restrictions on transfer or other
restrictive covenants, or any part thereof, is invalid or unenforceable,
such court shall have the power to reduce the duration or scope of such
provision, as the case may be, and, in its reduced form, such provision
shall then be enforceable
IN WITNESS WHEREOF, the Company and the Stockholders have caused
this Agreement to be duly executed as of the date first above written.
SHOREWOOD PACKAGING CORPORATION
By: ___________________________________
Name:
Title:
STOCKHOLDERS:
_______________________________________
Name:
Residential Address:
_______________________________________
Name:
Residential Address:
