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[LETTERHEAD]
LUTIN & COMPANY
575 MADISON AVENUE, 10th FLOOR
NEW YORK, NEW YORK 10022
Telephone (212) 605-0335
Facsimile (212) 605-0325
March 7, 2000
By telecopier:
804/697-1199
Chesapeake Corporation
1021 East Cary Street
Richmond, Virginia 23218-2350
To members of the board of directors:
At today’s open meeting of the “Chesapeake-Shorewood Forum” conducted by the
New York Society of Security Analysts’ Committee for Corporate Governance,
nobody responded when I asked if anyone present was representing Chesapeake
Corporation. The following questions were therefore posed by a consensus of
participants at the meeting for written submission to the members of
Chesapeake’s board of directors:
1. In the context of the board’s stated belief that a $40 per share
price to acquire the company was inadequate,
(a)
what is management’s plan for establishing shareholder value in
excess of $40 per share;
(b)
what benchmarks has the board established for monitoring progress
toward the achievement of management’s plan in quarterly or annual steps
over the pertinent period;
(c)
what incentives has the board established for management’s
achievement of the benchmark goals or ultimate plan objectives; and,
(d)
what are the advantages or disadvantages to shareholders of the
following provisions:
i) repricing of all senior management stock options at $40 per share;
ii) commitment of all board members to resign if goals are not achieved;
iii) modification of bylaws to eliminate poison pill and staggered board
provisions, either immediately or conditionally upon failure to achieve
goals?
2. What are the advantages or disadvantages to shareholders of
terminating the company’s poison pill, or of modifying it to the “chewable”
form providing for shareholder control of its extended use?
3. Since Charles Elson was identified by Chesapeake as a qualified
nominee to serve as a director of Shorewood in your recently abandoned
consent solicitation, and since Mr. Elson is widely respected for his
expertise in the governance issues which now concern Chesapeake’s
shareholders, what are the advantages or disadvantages of adding Mr. Elson
to Chesapeake’s board immediately, as permitted by your bylaws? (It should
be noted that Mr. Elson was not present when this question was developed,
and was not informed of it until after the meeting.)
Please let me know if you require any explanations of these questions, and
whether you prefer to respond in writing or at another open Forum meeting.
Very truly yours,
/S/
Gary Lutin
cc: Mr. Peter F. Brennan
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