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
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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
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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
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇ "▇▇▇ ▇▇▇") 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.
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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
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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
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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
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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
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
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Title: Senior Vice President Title: Senior Vice President
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