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 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.
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(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 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.
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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 Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 0000 (xxx "XXX Xxx") 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.
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
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(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 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
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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 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).
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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
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.
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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
/s/ Xxxxxxxx X. Xxxxxx /s/ Xxxxxx X. Xxxxx
By:__________________________________ By:__________________________________
Title: Senior Vice President Title: Senior Vice President
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