MEMORANDUM
TO: Executive Management Committee DATE: April 6, 1994
RE: Salaried Employees' Stock FROM: T.A. Smith
Purchase Plan
I have received several comments from employees concerning
the proposal to amend and restate the Salaried Employees' Stock
Purchase Plan (the "Plan") included in Chesapeake's Proxy
Statement. The following information is in response to the
questions and concerns and may be shared with your employees:
- The Plan currently has 198,880 shares remaining for
issuance. The proposal to amend and restate the Plan
includes authorization to issue up to 750,000 shares
after July 1, 1994. If the amended and restated Plan
is not approved, the Plan will run out of shares
authorized for issuance within the very near future.
If this occurs, the Plan will terminate and salaried
employees will lose the opportunity to participate in
the Plan and the Corporation will lose the benefits
derived from the employees' participation.
- The Plan currently provides a fixed company matching
contribution of 30%. The amended and restated Plan
allows the company matching contribution to be as much
as 60%. This provision was included to provide
flexibility to the Executive Compensation Committee
(the "Committee") of Chesapeake's Board of Directors
to set the match at any level up to the new maximum
amount. The Committee has discussed prescribing a
match which may vary for each plan year based on a
formula relating to the Corporation's financial
performance. Employees have expressed concern
that the amended and restated Plan does not provide
for a minimum match. Even though the Plan itself does
not provide for a minimum match, the Committee has the
flexibility to determine a minimum match that may
apply to any given plan year. In discussing a match
that may vary with performance, the Committee has
discussed the desirability of setting a minimum match
that may be applied to each plan year regardless of
the formula or the Corporation's financial
performance. The Committee has indicated that such a
minimum may be necessary to assure continued
participation in the Plan by salaried employees.
The Committee has not made a final decision on the
match for plan years starting after April 1, 1995 and
will consider the issue at a meeting later in the year
if the amended and restated Plan is approved by
Chesapeake's stockholders.
- Information that will be mailed to employees
concerning the plan year commencing July 1, 1994
will inform employees that the plan year will be a
short plan year ending March 31, 1995. The match for
this short plan year will continue at the current 30%
level. The plan year will then be a twelve month
period beginning each April 1 and ending on
March 31 of the following year. The match for the
plan year commencing April 1, 1995 will be determined
by the Committee as indicated above and announced
before March 1, 1995.
- The amended and restated Plan provides that employees
who terminate participation in the Plan during any
plan year and who do not receive a company matching
contribution will receive a refund of their
contributions plus interest. The current Plan does
not provide for any interest on the employee's
contributions. The interest rate that will apply
for a plan year will be determined before the start of
the plan year.
The primary purpose for the amendment and restatement of the
Plan is to increase the number of shares authorized under the
Plan. Without this increase in share authorization, the Plan will
terminate in the near future. In drafting the amended and
restated Plan, we felt it was important to increase the
flexibility provided by the Plan so that the Corporation can
assure that the Plan meets the Corporation's and employees'
objectives.
I would be glad to discuss this matter further with you or
any employee should you desire.
