-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NxwydVlhya7mEQPTLWr+gw+aDxn53vYG1xe25fJImrkKY6FN3tXLAhH9hO6thzXU Stqnjg+2utt1jbYwggjT0A== 0000912057-00-008731.txt : 20000229 0000912057-00-008731.hdr.sgml : 20000229 ACCESSION NUMBER: 0000912057-00-008731 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20000228 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SHOREWOOD PACKAGING CORP CENTRAL INDEX KEY: 0000800266 STANDARD INDUSTRIAL CLASSIFICATION: CONVERTED PAPER & PAPERBOARD PRODS (NO CONTAINERS/BOXES) [2670] IRS NUMBER: 112742734 STATE OF INCORPORATION: DE FISCAL YEAR END: 0427 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-38074 FILM NUMBER: 555345 BUSINESS ADDRESS: STREET 1: 277 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10172 BUSINESS PHONE: 2123711500 MAIL ADDRESS: STREET 1: 277 PARK AVENUE CITY: NEW YORK STATE: NY ZIP: 10172 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: ARIEL CAPITAL MANAGEMENT INC ET AL CENTRAL INDEX KEY: 0000766883 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 307 N MICHIGAN AVE STREET 2: SUITE 500 CITY: CHICAGO STATE: IL ZIP: 60601 BUSINESS PHONE: 3127260140 MAIL ADDRESS: STREET 1: 307 N MICHIGAN AVENUE STREET 2: SUITE 500 CITY: CHICAGO STATE: IL ZIP: 60601 SC 13D 1 13D UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ___ )* SHOREWOOD PACKAGING CORPORATION ------------------------------- (Name of Issuer) Common Stock $.01 Par Value --------------------------- (Title of Class of Securities) 825229107 --------- (CUSIP Number) Eric T. McKissack., Ariel Capital Management, Inc. 307 North Michigan Avenue, Suite 500, Chicago, IL 60601 Tel. # (312) 726-0140 ----------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) November 26, 1999 ----------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box / /. NOTE. Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D - ----------------------------------- ---------------------------- CUSIP No. 825229107 PAGE 2 OF 7 PAGES --- -- - ----------------------------------- ---------------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSON S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON ARIEL CAPITAL MANAGEMENT JOHN W. ROGERS, JR.* IRS ID # 36-3219058 - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / / (b) /X/ - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* N/A - -------------------------------------------------------------------------------- 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) / / N/A - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Illinois Corporation - -------------------------------------------------------------------------------- NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 4,106,264** OWNED BY EACH REPORTING PERSON WITH ------------------------------------------------------- 8 SHARED VOTING POWER Ariel 0 Rogers - 0 ------------------------------------------------------- 9 SOLE DISPOSITIVE POWER Ariel 4,106,264** Rogers - 0 ------------------------------------------------------- 10 SHARED DISPOSITIVE POWER Ariel 0 Rogers - 0 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON Ariel 4,106,264** Rogers - 0 - -------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* / / Not Applicable - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 14.9% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON * Ariel - IA Rogers - HC - -------------------------------------------------------------------------------- *This report is being made on behalf of John W. Rogers, Jr., President and principal shareholder of Ariel Capital Management, Inc., who may be deemed to have beneficial ownership of the securities of the issuer. Mr. Rogers disclaims beneficial ownership of shares held by Ariel Capital Management, Inc. **A report on Schedule 13G is being filed substantially simultaneous herewith relating to an additional 919,473 shares of Shorewood Common Stock owned by Ariel's clients but not part of the purchase agreement described herein. *SEE INSTRUCTIONS BEFORE FILLING OUT! INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. ___________________________ P. 2 [Page 3 of 7] ITEM 1. SECURITY AND ISSUER. This statement on Schedule 13D (this "Statement" or the "Schedule 13D") relates to the common stock, par value $0.01 per share (the "Common Stock") of Shorewood Packaging Corporation, a Delaware corporation (the "Issuer" or "Shorewood"). The principal executive offices of the Issuer are located at 277 Park Avenue, New York, New York 10172. ITEM 2. IDENTITY AND BACKGROUND. (a)-(c) This Statement is being filed by Ariel Capital Management, Inc., an Illinois corporation ("Ariel" or the "Reporting Person"). Ariel is located in Chicago, Illinois and is primarily engaged in providing investment advisory services for its clients. The address of the Reporting Persons' principal business and principal office is 307 North Michigan Avenue, Suite 500, Chicago, IL 60601. The name, address and present principal occupation of each of the directors and executive officers of the Reporting Person are set forth in Appendix A which is attached hereto. (d) During the last five years, neither the Reporting Person nor, to the best of the Reporting Person's knowledge, any of the directors or executive officers of the Reporting Persons, have been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) During the last five years, neither the Reporting Persons nor, to the best of the Reporting Person's knowledge, any of the directors or executive officers of the Reporting Person, have been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding is or was subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Each director and executive officer of the Reporting Person is a citizen of the United States. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. Not applicable. ITEM 4. PURPOSE OF TRANSACTION. On November 26, 1999, Chesapeake and Ariel entered into a stock purchase agreement (the "Purchase Agreement"), pursuant to which Ariel agreed to use its best efforts as investment advisor to exercise its discretionary authority to cause Ariel's clients to sell to Chesapeake an aggregate amount of shares (the "Purchased Shares"), representing approximately 14.9% of the [Page 4 of 7] Company's outstanding Shares (which the parties have agreed equals 4,106,264 shares), at a purchase price of $17.25 per share. The sale of the Purchased Shares was consummated on February 25, 2000. This Schedule 13D is being filed solely with respect to the Purchased Shares. Ariel's sole purpose for entering into the Purchase Agreement was a private sale of the Purchased Shares at a market premium. In executing the Purchase Agreement, Ariel acted as investment adviser for its clients, and not with the purpose of changing or influencing the control of the Shorewood. However, pursuant to certain provisions of the Purchase Agreement (as described in Section 6 below) and solely with respect to the Purchased Shares, Ariel could be deemed to have entered into a "group" for purposes of Section 13(d) of the Securities Act of 1933, as amended (the "Securities Act"). Notwithstanding the foregoing, Ariel expressly disclaims that it is a member of any group under Section 13(d) of the Act, with Chesapeake or any other party, and further disclaims any intent to (or effect of) change or influence the control of the issuer. In addition, Ariel had no pecuniary interests in the consummation of the transactions contemplated by the Purchase Agreement. In addition to the Purchased Shares, Ariel's clients hold an additional 919,473 shares of Common Stock. Following the filing of this Schedule 13D, Ariel intends to promptly file a final Schedule 13G reporting its beneficial ownership of the remaining 919,473 shares of Common Stock held by Ariel's clients (which is less than five percent of the issued and outstanding Common Stock). On December 3, 1999, Chesapeake and Sheffield Inc, a wholly-owned subsidiary of Chesapeake (collectively "Purchaser") filed a tender offer statement on Schedule 14D-1 (the "Schedule 14D-1") relating to the offer by Purchaser to purchase all outstanding shares of Common Stock, including the associated rights to purchase preferred stock, of Shorewood, not directly or indirectly owned by Chesapeake and its subsidiaries, for a purchase price of $17.25 per share, net to the seller in cash. Ariel was not consulted by Purchaser with respect to the tender offer, and did not in any manner participate in any of the discussions between Shorewood and Purchaser prior to or after the commencement of such offer. No proxy or consent solicitation was made by Chesapeake. On February 18, 2000, Purchaser's tender offer for the Common Stock of Shorewood expired in accordance with its terms. The sale of the Purchased Shares was consummated on February 25, 2000. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a) The aggregate number and percentage of Shares to which this Statement relates is 4,106,264 Shares, representing 14.9% of the 27,367,000 shares of Common Stock outstanding as reported by the Issuer on December 1, 1999 in the Issuer's Quarterly Report on Form 10-Q. In addition, Ariel's clients own an additional 948,054 shares of Common Stock, which are not subject to the terms of the Purchase Agreement and which continue to be held by Ariel's clients as passive investors without the intent or effect of influencing the control of Shorewood. All such shares were purchased in an open market transactions. [Page 5 of 7] (b) As of the date of this filing, Ariel has the discretionary power to direct the vote and the disposition of all shares of Common Stock owned by its clients. (c) A description of all transactions in the Shares, described in Item 4 and this Item 5, which transactions were effected by Ariel on behalf of its clients during the past 60 days is set forth on Ariel's Schedule 13G filed on January 8, 2000 (Amendment No. 16) and Schedule 13G filed February 9, 2000 (Amendment No. 17). (d) Ariel does not own the Purchased Shares, and acts as an investment adviser for its clients. Accordingly, Ariel's clients will receive the proceeds of the sale contemplated by the Purchase Agreement. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. Ariel intends to consummate the transactions contemplated by the Purchase Agreement as soon as possible. The Purchase Agreement is conditioned on the satisfaction of the requirements of the HSR Act and that the transaction not be subject to any adverse litigation or governmental proceeding. If, on the proposed closing date ("Closing"), Chesapeake's proposed purchase of the Purchased Shares would not then be permitted under Rule 10b-13 promulgated under the Exchange Act (because Chesapeake has commenced a public tender offer for Shares that has not terminated or expired as of that date), the Closing date will be postponed as necessary to permit closing in compliance with such Rule. The Purchase Agreement provides that if, prior to Closing, Chesapeake or any of its affiliates commences a public tender offer for shares of the Issuer at a purchase price that equals or exceeds $17.25 per Share, then Ariel has agreed to use its best efforts as investment adviser to exercise its discretionary authority to cause Ariel's clients to: (i) tender the Purchased Shares in such tender offer; and (ii) execute proxies or written consents in the form solicited by Chesapeake or any of its affiliates in any proxy or written consent solicitation commenced in connection with such tender offer. Ariel was never asked to execute proxies or written consents by Chesapeake since no such solicitation was commenced. If, within one year following the Closing date, Chesapeake, directly or indirectly, acquires a majority of the outstanding shares of the Issuer pursuant to a tender offer, merger, consolidation, business combination or other similar transaction, then Chesapeake will pay each Ariel client 100% of the excess, if any, of the per share consideration paid by Chesapeake in such transaction over $17.25, multiplied by the number of Shares purchased by Chesapeake from such Ariel client pursuant to the Purchase Agreement. If, within one year following the Closing date, any third party not affiliated with either Chesapeake or Ariel, directly or indirectly, acquires a majority of the outstanding shares of the Issuer pursuant to a tender offer, merger, [Page 6 of 7] consolidation, business combination or other similar transaction, then Chesapeake will pay each Ariel client the sum of (i) 100% of the excess, if any, of the highest per share consideration offered by Chesapeake in any public tender offer for shares (the "Highest Chesapeake Price") over $17.25 per share, plus (ii) 50% of the excess, if any, of the per Share consideration paid by such third party over the Highest Chesapeake Price, multiplied by the number of shares purchased by Chesapeake from such Ariel client pursuant to the Purchase Agreement. If, prior to the Closing, Chesapeake's purchase of 4,106,264 shares would result in Chesapeake becoming (i) an "Acquiring Person" as defined in the Rights Agreement of the Issuer, dated as of June 12, 1995, (the "Rights Agreement"), or (ii) an "interested stockholder" within the meaning of Section 203 of the Delaware General Corporation Law ("Section 203"), the number of shares to be purchased under the Purchase Agreement shall be reduced to one Share less than the number of Shares that, if purchased, would cause the Buyer to be deemed (A) an "Acquiring Person" as defined in the Rights Agreement, or (B) an "interested stockholder" within the meaning of Section 203. If prior to the Closing, a Distribution Date shall have occurred within the meaning of the Rights Agreement, Ariel's clients will sell to Chesapeake all of the Rights associated with the Purchased Shares. The foregoing description is qualified by and subject to the terms of the Purchase Agreement. A copy of the Purchase Agreement is attached hereto as Exhibit 1 and is incorporated herein by reference. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. Exhibit 1 Stock Purchase Agreement, dated November 26, 1999, between Chesapeake Corporation and Ariel Capital Management, Inc. [Page 7 of 7] SIGNATURE. After reasonable inquiry and to the best of the undersigned's knowledge and belief, the undersigned certify that the information set forth in this statement is true, complete and correct. ARIEL CAPITAL MANAGEMENT, INC. By: /s/ Eric T. McKissack --------------------- Eric T. McKissack Co-Chief Investment Officer and Senior Vice President /s/ JOHN W. ROGERS, JR.* -------------------------- JOHN W. ROGERS, JR. *By: /s/ Eric T. McKissack --------------------- Eric T. McKissack Dated: February 28, 2000 - -------------------- * Eric T. McKissack signs this Schedule 13D on behalf of John W. Rogers, Jr. pursuant to the power of attorney attached as Exhibit 1 to the Schedule 13G filed with the Securities and Exchange Commission on or about January 10, 1994, on behalf of Ariel Capital Management, Inc. and John W. Rogers, Jr. with respect to Oshkosh B'Gosh, Incorporated, which said power of attorney is hereby incorporated by reference. APPENDIX A DIRECTORS AND EXECUTIVE OFFICERS OF ARIEL CAPITAL MANAGEMENT, INC.
Officer/Director Address Position - ---------------- ------- -------- James W. Atkinson Ariel Capital Management Executive Vice President and Chief 307 North Michigan Avenue Financial Officer of Ariel Capital Suite 500 Management Chicago, IL 60601 James E. Bowman, Jr., M.D. University of Illinois Director. Professor Emeritus for the Chicago, IL 60637 Departments of Pathology and Medicine at the University of Chicago Mellody L. Hobson Ariel Capital Management Senior Vice President, Director of 307 North Michigan Avenue Marketing of Ariel Capital Management Suite 500 Chicago, IL 60601 Merrillyn J. Kosier Ariel Capital Management Senior Vice President/Director of 307 North Michigan Avenue Mutual Fund Marketing of Directors of Suite 500 Ariel Capital Management Chicago, IL 60601 Franklin Morton Ariel Capital Management Senior Vice President and Director of 307 North Michigan Avenue Research of Ariel Capital Management Suite 500 Chicago, IL 60601 Eric T. McKissack Ariel Capital Management Chairman and Co-Chief Investment 307 North Michigan Avenue Officer of Ariel Capital Management Suite 500 Chicago, IL 60601 Henry B. Pearsall c/o Ariel Funds Director. Former Chairman of the 307 North Michigan Avenue Board of Sanford Corporation. Member Suite 500 of Board of Directors of First Chicago, IL 60601 Colonial Bankshares Corporation, Avenue Bank of Oak Park, First Colonial Trust Company and Swing -N-Slide Anna Perez c/o Ariel Funds Director. General Manager of Officer/Director Address Position - ---------------- ------- -------- 307 North Michigan Avenue Corporation Communications and Suite 500 Programs, Chevron Corporation Chicago, IL 60601 John W. Rogers, Jr. Ariel Funds President, Treasurer and Chairman of 307 North Michigan Avenue the Board of Directors of Ariel Suite 500 Capital Management Chicago, IL 60601 Roger P. Schmitt Ariel Capital Management Vice President/Chief Information 307 North Michigan Avenue Officer, Assistant Secretary, and Suite 500 Assistant Treasurer of Ariel Capital Chicago, IL 60601 Management Robert I. Solomon 5215 Old Orchard Boulevard Director; Vice President, Marketing, Skokie, IL 60079 of Silliker Laboratories. Peter Q. Thompson Ariel Capital Management Senior Vice President/Director of 307 North Michigan Avenue Institutional Marketing and Client Suite 500 Services of Ariel Capital Management Chicago, IL 60601 Roxanne Ward Ariel Capital Management Vice President and Secretary of Ariel 307 North Michigan Avenue Capital Management Suite 500 Chicago, IL 60601 Paula Wolff 4920 South Greenwood Director. President of Governors Chicago, IL 60615 State University.
EX-99.1 2 EXHIBIT 99.1 Exhibits to Schedule 13D of Ariel Capital Management, Inc. relating to Shares of Shorewood Packaging Corporation ----------------------------------------- Exhibit No. - ----------- Exhibit 1 Stock Purchase Agreement, dated November 26, 1999, between Chesapeake Corporation and Ariel Capital Management, Inc. EXHIBIT 1 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. (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 2 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. SECTION THREE BUYER'S REPRESENTATIONS AND WARRANTIES Buyer hereby represents and warrants to Ariel as follows: (a) Buyer is a corporation duly incorporated, validly existing and in good standing under the laws of the Commonwealth of Virginia; (b) Buyer has full corporate power and authority to execute, deliver and perform its obligations under this Agreement; (c) this Agreement has been duly authorized, executed and delivered by Buyer and constitutes the legal, valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms; (d) the execution, delivery and performance of this Agreement by Buyer will not (i) conflict with or result in any breach of any provision of the Articles of Incorporation or bylaws of Buyer, (ii) violate any requirement of law or any existing mortgage, contract, lease, indenture or agreement binding on Buyer or Buyer's property or (iii) result in the creation or imposition of any lien on any of the properties or assets of Buyer pursuant to the provisions of any of the foregoing; (e) except for compliance with the requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") and any applicable reporting requirements under the Exchange Act, no consent of any other person and no consent, license, permit, approval or authorization of, exemption by, notice or report to, or registration, filing or declaration with, any governmental authority is required in connection with the execution, delivery or performance of this Agreement by Buyer. Buyer agrees promptly to file a Premerger Notification and Report Form under the HSR Act with respect to the transactions contemplated herein; and (f) Buyer is an accredited investor (within the meaning of Rule 501 under the Securities Act of 1933, as amended), and is purchasing the Purchased Shares for investment and not with a present intent to conduct a distribution thereof. 3 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. 4 (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 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 5 (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). 6 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. [REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK] 7 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. ARIEL: BUYER: ARIEL CAPITAL MANAGEMENT, INC. CHESAPEAKE CORPORATION By: /s/ Franklin L. Morton By: /s/ Andrew J. Kohut ----------------------------------- ----------------------------- Title: Senior Vice President Title: Senior Vice President 8 -----END PRIVACY-ENHANCED MESSAGE-----