For Immediate Release - CANAL CORP - 12-3-1999 by CSKEQ-Agreements

VIEWS: 4 PAGES: 53

									FOR IMMEDIATE RELEASE CHESAPEAKE COMMENCES $17.25 PER SHARE CASH TENDER OFFER FOR SHOREWOOD Intends To Conduct Consent Solicitation To Remove Shorewood Board (Richmond, VA--December 3, 1999) Chesapeake Corporation (NYSE: CSK) today announced that it has commenced a tender offer to acquire all outstanding shares of Shorewood Packaging Corporation (NYSE: SWD) for $17.25 in cash per share, or approximately $500 million. The tender offer would be followed by a second step merger at the same cash price paid in the tender offer. Upon completion of the transaction, Chesapeake would also assume approximately $270 million in Shorewood debt. The transaction can be effected by Chesapeake with cash on hand and a committed credit facility from First Union National Bank, and is not subject to a financing condition. Chesapeake's tender offer represents an approximate 45% premium to Shorewood's closing stock price on November 9, 1999, the day prior to Chesapeake's initial proposal to Shorewood's board of directors. The acquisition of Shorewood is expected to be accretive to Chesapeake's earnings per share in the first year of the combination. Based on available public information, Chesapeake anticipates annual synergies of at least $20 million from the combination of corporate and administrative functions, purchasing savings, and multiple crossselling opportunities. Chesapeake today also announced that it is filing preliminary materials with the Securities and Exchange Commission related to a planned solicitation of written consents from Shorewood's stockholders. Through the consent solicitation, Chesapeake would, among other things, seek to amend the bylaws of Shorewood to eliminate its classified board structure, remove Shorewood's Board of Directors, and replace the Shorewood directors with independent directors. Chesapeake expects that the independent director nominees, if elected and subject to their fiduciary duties under applicable law, will seek to maximize value for Shorewood stockholders. As previously announced, Chesapeake has entered into an agreement with a Shorewood institutional investor to purchase approximately 4.1 million shares, or 14.9% of Shorewood's outstanding common stock. Under that agreement, the investor will tender the 4.1 million shares to Chesapeake's tender offer and will execute written consents with respect to those shares in Chesapeake's consent solicitation. Thomas H. Johnson, president and chief executive officer of Chesapeake, said, "We believe Chesapeake's acquisition of Shorewood will be beneficial to shareholders, employees and customers. Chesapeake's strategy is to expand its international network of specialty packaging and merchandising services. The acquisition of Shorewood, under Chesapeake's leadership, will allow Chesapeake to provide our customers with an even larger, synergistic array of products and services. Members of our senior management team have the proven expertise to run large-scale global packaging operations. We look forward to working with Shorewood to provide value for shareholders, opportunity for employees, and excellent services and products for customers. It is our continued hope to meet with Shorewood's board to discuss this unique opportunity," concluded Mr. Johnson. The tender offer is open to all holders of common stock. The offer and withdrawal rights will expire at midnight, New York time on Monday, January 3, 2000, unless extended. The tender offer is conditioned upon, among other things, there being validly tendered and not withdrawn before the expiration date, a number of shares which, when added to the number of shares beneficially owned by Chesapeake and its affiliates, represents a majority of Shorewood's outstanding shares on a fully diluted basis, and the expiration or termination of any applicable waiting period under the Hart-Scott-

Rodino Antitrust Improvements Act of 1976. The complete terms and conditions of the tender offer and anticipated consent solicitation are set forth in the offering documents filed today with the Securities and Exchange

Rodino Antitrust Improvements Act of 1976. The complete terms and conditions of the tender offer and anticipated consent solicitation are set forth in the offering documents filed today with the Securities and Exchange Commission. Goldman, Sachs & Co. and Donaldson, Lufkin & Jenrette are acting as co- financial advisors to Chesapeake. Hunton & Williams is acting as legal advisor. D.F. King & Co., Inc. is the information agent for the tender offer. Chesapeake Corporation, headquartered in Richmond, Va., is a global leader in specialty packaging and merchandising services. Chesapeake is the largest North American producer of temporary and permanent pointof-purchase displays, the North American leader for litho-laminated packaging, the leading European folding carton, leaflet and label supplier, and a local leader in specific U.S. markets for customized, corrugated packaging. Chesapeake has over 40 locations in North America, Europe and Asia. Chesapeake's net sales in 1998 were $950.4 million. Chesapeake's website is www.cskcorp.com. ### This news release, including comments by Thomas H. Johnson, contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The accuracy of such statements is subject to a number of risks, uncertainties, and assumptions that may cause Chesapeake's actual results to differ materially from those expressed in the forward-looking statements including, but not limited to: competitive products and pricing; production costs, particularly for raw materials such as corrugated box, folding carton and display materials; fluctuations in demand; government policies and regulations affecting the environment; interest rates; currency translation movements; Year 2000 compliance; and other risks that are detailed from time to time in reports filed by the Company with the Securities and Exchange Commission.
For media relations, call: For investor relations, call:

Molly Remes 804-697-1110

William Tolley/Joel Mostrom 804-697-1157/804-697-1147

Joele Frank or Andy Brimmer Abernathy MacGregor Frank 212-371-5999 2

Notice of Guaranteed Delivery for Tender of Shares of Common Stock (Including the Associated Rights to Purchase Preferred Stock) of Shorewood Packaging Corporation Pursuant to the Offer to Purchase dated December 3, 1999 by Sheffield, Inc. a wholly owned subsidiary of Chesapeake Corporation As set forth in Section 3 of the Offer to Purchase (as defined below), this form or one substantially equivalent may be used to accept the Offer (as defined below) if certificates for shares of common stock, par value $0.01 per share (the "Common Stock"), including the associated rights to purchase preferred stock (the "Rights" and, collectively with the Common Stock, the "Shares"), of Shorewood Packaging Corporation, a Delaware corporation (the "Company"), are not immediately available, or if the procedure for book-entry transfer cannot

Notice of Guaranteed Delivery for Tender of Shares of Common Stock (Including the Associated Rights to Purchase Preferred Stock) of Shorewood Packaging Corporation Pursuant to the Offer to Purchase dated December 3, 1999 by Sheffield, Inc. a wholly owned subsidiary of Chesapeake Corporation As set forth in Section 3 of the Offer to Purchase (as defined below), this form or one substantially equivalent may be used to accept the Offer (as defined below) if certificates for shares of common stock, par value $0.01 per share (the "Common Stock"), including the associated rights to purchase preferred stock (the "Rights" and, collectively with the Common Stock, the "Shares"), of Shorewood Packaging Corporation, a Delaware corporation (the "Company"), are not immediately available, or if the procedure for book-entry transfer cannot be complied with on a timely basis, or all required documents cannot be delivered to the Depositary prior to the Expiration Date (as defined in Section 1 of the Offer to Purchase). This form may be delivered by hand to the Depositary or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution (as defined in Section 3 of the Offer to Purchase). See Section 3 of the Offer to Purchase. The Depositary for the Offer is:
Harris Trust and Savings Bank By Mail: c/o Harris Trust Company of New York Wall Street Station P. O. Box 1010 New York, New York 10268-1010 By Hand or Overnight Courier: c/o Harris Trust Company of New York 88 Pine Street, 19th Floor New York, New York 10005

Facsimile Transmission: (Eligible Institutions Only) (212) 701-7636 Confirm by Telephone: (212) 701-7624 DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY. This form is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an Eligible Institution under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal. THE GUARANTEE ON THE REVERSE MUST BE COMPLETED

Ladies and Gentlemen: The undersigned hereby tenders to Sheffield, Inc., a Delaware corporation ("Purchaser") and a wholly owned subsidiary of Chesapeake Corporation, a Virginia corporation, on the terms and subject to the conditions set forth in the Offer to Purchase, dated December 3, 1999 (the "Offer to Purchase"), and the related Letter of Transmittal (which, as amended or supplemented from time to time, together constitute the "Offer"), receipt of which is hereby acknowledged, the number of shares of Common Stock, par value $0.01 per share (the "Common Stock"), including the associated rights to purchase preferred stock (the "Rights" and, collectively with the Common Stock, the "Shares"), of Shorewood Packaging Corporation, a Delaware corporation (the "Company") set forth below, all pursuant to the guaranteed delivery procedures set forth in Section 3 of the Offer to Purchase.
Number of Shares: _________________ Certificate Nos. (if available): ___________________________________ Name(s) of Record Holder(s): ______ ___________________________________ ___________________________________ Please Type or Print Address(es): ______________________ ___________________________________ Daytime Area Code and Tel. No.: ___ ___________________________________ Signature(s): _____________________ ___________________________________

CHECK BOX IF SHARES WILL BE TENDERED BY BOOK-ENTRY TRANSFER [_] Account Number: ___________________ Dated: ____________________________

THE GUARANTEE SET FORTH BELOW MUST BE COMPLETED GUARANTEE (Not To Be Used for Signature Guarantee) The undersigned, a participant in the Security Transfer Agents Medallion Program, the New York Stock Exchange Medallion Signature Guarantee Program or the Stock Exchange Medallion Program, hereby guarantees to deliver to the Depositary either the certificates representing the Shares tendered hereby, in proper form for transfer, or a Book-Entry Confirmation (as defined in the Offer to Purchase) with respect to such Shares, in any such case together with a properly completed and duly executed Letter of Transmittal, with any required signature guarantees, or an Agent's Message (as defined in Section 3 of the Offer to Purchase), and any other required documents, within THREE New York Stock Exchange trading days after the date hereof. The Eligible Institution that completes this form must communicate this guarantee to the Depositary and must deliver the Letter of Transmittal and certificates for Shares to the Depositary within the time period shown herein. Failure to do so could result in a financial loss to such Eligible Institution.
Name of Firm: _______________________ _____________________________________ (Authorized Signature) Name: _______________________________ (Please Type or Print) Title: ______________________________

Address: ____________________________

_____________________________________ (Zip Code) Area Code and Tel No.: ______________

Dated: ______________________________

NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES FOR SHARES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.

2

CONFIDENTIAL November 10, 1999 Chesapeake Corporation James Center II Richmond, VA 23218-2350 Attention: William T. Tolley Senior Vice President Finance & CFO Re: Commitment Letter--Proposed Tender Financing Credit Facilities Ladies and Gentlemen: Chesapeake Corporation, a Virginia corporation ("Company "), has advised First Union National Bank ("Bank ") that it (a) has formed a corporation ("AcquisitionCo ") to acquire, through an unsolicited and non-negotiated tender offer (the "Tender Offer "), up to all of the issued and outstanding capital stock (the "Shares ") and associated rights to purchase preferred stock (the "Rights ") of a company which you have identified to us ("Target ") for a purchase price per Share not in excess of an amount you have previously identified to us (the "Acquisition "), (b) intends, as promptly as is practicable following the consummation of such Acquisition, merge AcquisitionCo with and into Target, such that the surviving entity of such merger is a wholly-owned subsidiary of Company (the "Merger ") and (c) intends to commence a written consent solicitation requesting shareholders of Target to, among other things, remove and replace Target's Board of Directors (the "Solicitation "). In connection with the foregoing, you have informed us that as a result of the Acquisition, existing debt of (a) Target in an outstanding principal amount you have previously identified to us, and (b) Company in an outstanding principal amount you have previously identified to us, is expected to be refinanced (collectively, the "Refinancing ", and, together with the Acquisition, the Tender Offer, the Solicitation, the Merger and the transactions related thereto, the "Transaction "). You have also informed us that Company will require up to $750 million in senior secured credit facilities (the "Credit Facilities ") in order to (i) finance the Tender Offer, (ii) consummate the Refinancing and the Solicitation, (iii) finance the Merger, (iv) pay fees and expenses in connection with the Transaction and (v) provide working capital for, and for the general corporate purposes of, Company and its subsidiaries after consummation of the Merger. Based upon and subject to the foregoing and the terms and conditions set forth below, Bank is pleased to confirm to you its commitment to provide the full amount of the Credit Facilities on the terms set forth in the Term Sheet (as defined below) (our "Commitment ") and to act as the sole administrative agent for a syndicate of financial institutions (together with Bank, the "Lenders ") that it intends to form to provide a portion of the Credit Facilities. It is agreed that Bank, through its affiliate, First Union Securities, Inc. ("FUS " or the "Arranger "), will also serve as the sole lead arranger and sole book runner of the Credit Facilities and that no additional agents or co-agents or arrangers will be appointed or fees paid to any other lenders in connection with the Credit Facilities without the prior written consent of Bank and FUS. Attached as Exhibit A to this letter is a Summary of Terms and Conditions (the "Term Sheet ") setting forth a summary outline of the principal terms and conditions on and subject to which Bank is willing to make available the Credit Facilities. In addition, whether before or after the closing of the Credit Facilities, Bank shall be entitled, after consultation with you, to change the pricing, structure (including the reallocation of tranches of loans) and/or terms of the Credit Facilities if Bank determines that such changes are necessary in order to ensure a successful pre-closing or post- closing syndication or an optimal credit structure of the Credit Facilities, such right to continue and survive

(together with your other obligations with respect to syndication provided for herein) until the completion of such syndication notwithstanding any termination of the Commitment or funding under the Credit Facilities; provided

CONFIDENTIAL November 10, 1999 Chesapeake Corporation James Center II Richmond, VA 23218-2350 Attention: William T. Tolley Senior Vice President Finance & CFO Re: Commitment Letter--Proposed Tender Financing Credit Facilities Ladies and Gentlemen: Chesapeake Corporation, a Virginia corporation ("Company "), has advised First Union National Bank ("Bank ") that it (a) has formed a corporation ("AcquisitionCo ") to acquire, through an unsolicited and non-negotiated tender offer (the "Tender Offer "), up to all of the issued and outstanding capital stock (the "Shares ") and associated rights to purchase preferred stock (the "Rights ") of a company which you have identified to us ("Target ") for a purchase price per Share not in excess of an amount you have previously identified to us (the "Acquisition "), (b) intends, as promptly as is practicable following the consummation of such Acquisition, merge AcquisitionCo with and into Target, such that the surviving entity of such merger is a wholly-owned subsidiary of Company (the "Merger ") and (c) intends to commence a written consent solicitation requesting shareholders of Target to, among other things, remove and replace Target's Board of Directors (the "Solicitation "). In connection with the foregoing, you have informed us that as a result of the Acquisition, existing debt of (a) Target in an outstanding principal amount you have previously identified to us, and (b) Company in an outstanding principal amount you have previously identified to us, is expected to be refinanced (collectively, the "Refinancing ", and, together with the Acquisition, the Tender Offer, the Solicitation, the Merger and the transactions related thereto, the "Transaction "). You have also informed us that Company will require up to $750 million in senior secured credit facilities (the "Credit Facilities ") in order to (i) finance the Tender Offer, (ii) consummate the Refinancing and the Solicitation, (iii) finance the Merger, (iv) pay fees and expenses in connection with the Transaction and (v) provide working capital for, and for the general corporate purposes of, Company and its subsidiaries after consummation of the Merger. Based upon and subject to the foregoing and the terms and conditions set forth below, Bank is pleased to confirm to you its commitment to provide the full amount of the Credit Facilities on the terms set forth in the Term Sheet (as defined below) (our "Commitment ") and to act as the sole administrative agent for a syndicate of financial institutions (together with Bank, the "Lenders ") that it intends to form to provide a portion of the Credit Facilities. It is agreed that Bank, through its affiliate, First Union Securities, Inc. ("FUS " or the "Arranger "), will also serve as the sole lead arranger and sole book runner of the Credit Facilities and that no additional agents or co-agents or arrangers will be appointed or fees paid to any other lenders in connection with the Credit Facilities without the prior written consent of Bank and FUS. Attached as Exhibit A to this letter is a Summary of Terms and Conditions (the "Term Sheet ") setting forth a summary outline of the principal terms and conditions on and subject to which Bank is willing to make available the Credit Facilities. In addition, whether before or after the closing of the Credit Facilities, Bank shall be entitled, after consultation with you, to change the pricing, structure (including the reallocation of tranches of loans) and/or terms of the Credit Facilities if Bank determines that such changes are necessary in order to ensure a successful pre-closing or post- closing syndication or an optimal credit structure of the Credit Facilities, such right to continue and survive

(together with your other obligations with respect to syndication provided for herein) until the completion of such syndication notwithstanding any termination of the Commitment or funding under the Credit Facilities; provided that the total amount of the senior secured Credit Facilities remains unchanged.

(together with your other obligations with respect to syndication provided for herein) until the completion of such syndication notwithstanding any termination of the Commitment or funding under the Credit Facilities; provided that the total amount of the senior secured Credit Facilities remains unchanged. Bank and Arranger shall manage all aspects of the syndication of the Credit Facilities, and you agree to assist Bank and to cause, from and after consummation of the Tender Offer and/or the Solicitation, Target to assist Bank in forming such syndicate and to provide Bank and the other Lenders, promptly upon request, with all information reasonably requested by them to complete successfully the syndication, including, but not limited to, (a) an information package for delivery to potential syndicate members and participants and (b) all information and projections prepared by you or your advisers relating to the transactions described herein. You also agree to use your best efforts to ensure that Bank's syndication efforts benefit from your existing lending relationships as well as, from and after consummation of the Tender Offer and/or the Solicitation, those of Target. You further agree to make appropriate senior officers and representatives of Company and, from and after consummation of the Tender Offer and/or the Solicitation, Target available to participate in information meetings for potential syndicate members and participants at such times and places as Bank may reasonably request. Bank reserves the right to engage the services of FUS and other of its affiliates in furnishing the services to be performed as contemplated herein and to allocate (in whole or in part) to any such affiliates any fees payable to it in such manner as it and its affiliates may agree in their sole discretion. You agree that Bank may share with any of its officers, affiliates and advisors any information related to the Transaction or any other matter contemplated hereby, on a confidential basis. You represent and warrant and covenant that: (a) all information which has been or is hereafter made available to Bank by you or any of your representatives or, from and after consummation of the Tender Offer and/or the Solicitation, Target or any of its representatives in connection with the transactions contemplated hereby is and will be complete and correct in all material respects and does not and will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained therein not materially misleading in light of the circumstances under which such statements are made; and (b) all financial projections that have been or are hereafter prepared by you or on your behalf and made available to Bank or any other participant in any Credit Facility have been or will be prepared in good faith based upon reasonable assumptions. You agree to supplement the information and projections referred to in clauses (a) and (b) above from time to time until completion of each syndication so that the representations and warranties in the preceding sentence remain correct in all material respects. In arranging and syndicating the Credit Facilities, Bank will use and rely on such information and projections without independent verification thereof. In connection with the syndication of the Credit Facilities, Bank may, in its discretion, allocate to other Lenders portions of any fees payable to Bank in connection with the Credit Facilities. You agree that no Lender will receive any compensation of any kind for its participation in any Credit Facility, except as expressly provided for in this letter or in the Fee Letter referred to below or as may be mutually agreed upon in writing. The commitments of Bank hereunder are also subject to (a) there not occurring or becoming known to us any material adverse condition or material adverse change in or affecting the business, property, operations, nature of assets, assets, revenues, operations, tax position, liabilities, debt services capacity, condition (financial or otherwise) or prospects of Company or Company and its subsidiaries taken as a whole or Target or Target and its subsidiaries taken as a whole, (b) our not 2

being aware after the date hereof of any information or other matter which is inconsistent in a material and adverse manner with any information or other material disclosed to us prior to the date hereof, (c) there not having occurred a material disruption of or material adverse change in financial, banking or capital market conditions that, in our judgment, could materially impair the syndication of the Credit Facilities, (d) there not being

being aware after the date hereof of any information or other matter which is inconsistent in a material and adverse manner with any information or other material disclosed to us prior to the date hereof, (c) there not having occurred a material disruption of or material adverse change in financial, banking or capital market conditions that, in our judgment, could materially impair the syndication of the Credit Facilities, (d) there not being any competing offering, placement or arrangement of any debt securities or bank financing by or on behalf of Company or any of its affiliates or, after consummation of the Tender Offer, Target or any of its affiliates, unless otherwise agreed to by Bank, (e) our review and reasonable satisfaction with the terms of the documentation governing the Transaction, (f) the negotiation, execution and delivery on or before February 29, 2000 of definitive documentation with respect to the Tender Offer Facility (as defined in the Term Sheet) reasonably satisfactory to Bank and its counsel and the negotiation, execution and delivery on or before April 30, 2000 of definitive documentation with respect to the Take-Out Facilities (as defined in the Term Sheet) satisfactory to Bank and its counsel, (g) compliance with all applicable laws and regulations (including without limitation compliance of the Commitment and the transactions described herein, with Regulation U and all other applicable banking laws, rules and regulations), (h) sources and uses of funds being as we have previously discussed, and (i) the other conditions set forth in the Term Sheet. Additionally, it shall be a condition to our commitments hereunder that the definitive documents to be filed with the Securities and Exchange Commission with respect to the commencement of the Tender Offer (including the Target shareholder consent solicitation materials) shall be provided to us prior to the commencement of the Tender Offer and that all matters relating to the Credit Facilities and the financing of the Transaction shall be in form and substance reasonably satisfactory to us. The reasonable out-of-pocket costs and expenses of Bank and Arranger (including, without limitation, the fees and expenses of Mayer, Brown & Platt, counsel to Bank and any appropriate local counsel and Bank's due diligence, syndication and other out-of-pocket expenses) arising in connection with the preparation, execution and delivery of this letter and the definitive financing agreements and otherwise in connection with the Transaction shall be for your account and shall be payable initially on the earlier to occur of the initial funding under the Credit Facilities or upon termination or expiration of the Commitments and thereafter on demand. You further agree to indemnify and hold harmless each Lender, Bank and Arranger and each director, officer, employee, affiliate and agent of each thereof (each, an "indemnified person ") against, and to reimburse each indemnified person, upon its demand, for, any losses, claims, damages, liabilities or other expenses ("Losses ") to which such indemnified person may become subject insofar as such Losses arise out of or in any way relate to or result from the Transaction or any aspect thereof, this letter or the financings contemplated hereby, including, without limitation, Losses consisting of legal or other expenses incurred in connection with investigating, defending or participating in any legal proceeding relating to any of the foregoing (whether or not such indemnified person is a party thereto); provided that the foregoing will not apply to any Losses of an indemnified person to the extent they are found by a final decision of a court of competent jurisdiction to have resulted from the gross negligence or willful misconduct of such indemnified person. Your obligations under this paragraph shall remain effective whether or not definitive financing documentation is executed and notwithstanding any termination or expiration of this letter or the offer contained herein. Neither Bank nor Arranger nor any of their affiliates nor any other indemnified person shall be responsible or liable to any other person or entity for consequential damages which may be alleged as a result of this letter or the financings contemplated hereby and neither Bank nor any other indemnified person shall be responsible or liable for any damages which may be alleged as a result of its failure, in accordance with the terms of this letter, to provide or participate in the Credit Facilities. The provisions of this letter are supplemented as set forth in, and are conditioned upon, a separate confidential fee letter dated the date hereof from us to you (the "Fee Letter ") and are subject to the terms of such Fee Letter. By executing this letter, you acknowledge that this letter and the Fee Letter are the only agreements between you and Bank with respect to the Credit Facilities and set forth 3

the entire understanding of the parties with respect thereto. This letter and the Fee Letter and the respective obligations and rights hereunder and thereunder shall not be delegated or assigned by you without our prior written consent. This letter may not be amended or otherwise modified except pursuant to a writing signed by each of the parties hereto. This letter may be executed by the signatories hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together one and the same letter. THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. EACH OF THE UNDERSIGNED PARTIES HEREBY KNOWINGLY,

the entire understanding of the parties with respect thereto. This letter and the Fee Letter and the respective obligations and rights hereunder and thereunder shall not be delegated or assigned by you without our prior written consent. This letter may not be amended or otherwise modified except pursuant to a writing signed by each of the parties hereto. This letter may be executed by the signatories hereto in several counterparts, each of which shall be deemed to be an original and all of which shall constitute together one and the same letter. THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. EACH OF THE UNDERSIGNED PARTIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF OR IN CONNECTION WITH, THIS COMMITMENT LETTER AND THE FEE LETTER, AND ANY OTHER COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY OF THE UNDERSIGNED PARTIES IN CONNECTION HEREWITH OR THEREWITH. By your acceptance hereof, you agree that neither this letter (including, without limitation, the Term Sheet), the Fee Letter, nor any of their terms or substance, shall be disclosed, directly or indirectly, to any other person except (a) this letter and the Term Sheet (but not the Fee Letter) may be disclosed to Target and those of your employees, agents and advisers who are directly involved in the consideration of this matter and (b) this letter, the Term Sheet and the Fee Letter may be disclosed if and to the extent disclosure is compelled in a judicial or administrative proceeding or as otherwise required by law or by an express request from the Securities and Exchange Commission (provided that in any such case Company shall request, to the maximum extent possible, confidential treatment for the Fee Letter) (and in each such event of permitted disclosure you agree promptly to inform us and, to the extent not proscribed by such proceeding or legal requirement, provide us with a reasonable opportunity to review and comment upon the contents of such disclosure). Your obligations under this paragraph shall remain effective whether or not definitive financing documentation is executed and notwithstanding any termination or expiration of this letter or the offer contained herein. If you are in agreement with the foregoing, please sign and return to Bank and Arranger the enclosed copies of this letter and the Fee Letter (together with payment of the fees described therein) no later than 3:00 p.m., New York time, on December 2, 1999, at which time this offer shall terminate (and we shall have no obligations whatsoever to you) unless prior thereto we shall have received signed copies of such letters and payment of such fees. Following your execution and delivery of this letter and the Fee Letter in accordance with the preceding sentence, our commitments hereunder shall terminate (and we shall have no obligations whatsoever to you) at 5:00 p.m., New York time, on February 29, 2000 unless on or prior to such time definitive documentation with respect to the Tender Offer Facility satisfactory to us and our counsel has been executed and delivered by you, any applicable Lenders and us and at 5:00 p.m., New York time, on April 30, 2000, unless on or prior to such time, definitive documentation with respect to the Take-Out Facilities satisfactory to us and our counsel has been executed and delivered by you, the applicable Lenders and us. 4

We took forward to working with you on this transaction. Sincerely, First Union National Bank
/s/ Charles W. Lockyer By: _________________________________ Title:Vice President

First Union Securities, Inc.
/s/ Ted Swimmer By: _________________________________ Title:

We took forward to working with you on this transaction. Sincerely, First Union National Bank
/s/ Charles W. Lockyer By: _________________________________ Title:Vice President

First Union Securities, Inc.
/s/ Ted Swimmer By: _________________________________ Title:

Accepted and agreed to as of the date first above written: Chesapeake Corporation
/s/ William T. Tolley By: _________________________________ Title: Senior Vice President-Finance and Chief Financial Officer

5

EXHIBIT A $750,000,000 CHESAPEAKE CORPORATION CREDIT FACILITIES Summary of Terms and Conditions November 10, 1999 (Unless otherwise defined, terms used and not defined in this Summary of Terms and Conditions have the meanings assigned thereto in the letter agreement dated November 10, 1999 (the "Commitment Letter"), to which this Summary of Terms and Conditions is an exhibit.)

I.Parties Borrower: Collectively, Chesapeake Corporation, a Virginia corporation ("Company"), and/or a newly-formed wholly-owned subsidiary thereof established solely for the purpose of being an acquisition vehicle named Sheffield, Inc., a Delaware corporation ("AcquisitionCo").

Lead Arranger and Sole Book Runner: First Union Securities, Inc. ("FUS") Administrative Agent: First Union National Bank (in such capacity, the "Administrative Agent").

EXHIBIT A $750,000,000 CHESAPEAKE CORPORATION CREDIT FACILITIES Summary of Terms and Conditions November 10, 1999 (Unless otherwise defined, terms used and not defined in this Summary of Terms and Conditions have the meanings assigned thereto in the letter agreement dated November 10, 1999 (the "Commitment Letter"), to which this Summary of Terms and Conditions is an exhibit.)

I.Parties Borrower: Collectively, Chesapeake Corporation, a Virginia corporation ("Company"), and/or a newly-formed wholly-owned subsidiary thereof established solely for the purpose of being an acquisition vehicle named Sheffield, Inc., a Delaware corporation ("AcquisitionCo").

Lead Arranger and Sole Book Runner: First Union Securities, Inc. ("FUS") Administrative Agent: First Union National Bank (in such capacity, the "Administrative Agent"). The banks, financial institutions and other entities, including Bank, selected by the Arranger in the syndication effort (collectively, the "Lenders"). Bank (or another Lender selected by the Administrative Agent).

Lenders:

Letter of Credit Issuer:

II.Type and Amount of Facilities
A.Tender Offer Facility: A 90-day senior, secured short-term bridge term loan facility (the "Tender Offer Facility") in the aggregate principal amount of the lesser of (a) up to $750 million (the "Tender Offer Facility Commitment Amount") and (b) the sum of (i) the amount necessary to make payment for all of the Shares of Target tendered and purchased pursuant to the Tender Offer, (ii) the amount necessary to refinance certain indebtedness of Company and Target previously identified by Company to the Administrative Agent, (iii) the amount necessary to provide for the working capital needs of Company during this period, and (iv) the amount necessary to pay the Transaction costs and expenses due on the Tender Offer Closing Date. The Tender Offer Facility shall be available in a single drawing on the date upon which the conditions precedent to such borrowing set forth in Articles V.A. and V.C. below are satisfied (the "Tender Offer Closing Date").

Availability:

Amortization: The Tender Offer Facility shall amortize in a single installment on the date on which the earlier of (a) the 90th day following the 6

drawing of the Tender Offer Loan and (b) the date consummation of the Merger occurs. Use of Proceeds: The proceeds of the loans under the Tender Offer Facility (the "Tender Offer Loans") shall be used by the Borrower to (a) pay for the purchase of Shares tendered and purchased pursuant to the Tender Offer at a purchase price not greater than the price per Share previously identified by you to us, (b) refinance certain indebtedness of Company and Target previously identified by Company to the Administrative Agent, (c) provide for the working capital needs of Company during this period, and (d) pay for Transaction fees and expenses in connection with the Transaction.

B.Take-Out Facilities:

1.Term Loan Facilities: (a)Eighteen Month Facility
Type of Facility: Eighteen Month Facility: an eighteen month senior, secured term loan facility in the aggregate principal amount of $150,000,000 (the "Eighteen Month Facility"). The Eighteen Month Facility shall be available in a single drawing on the date upon which the conditions precedent to such borrowing set forth Articles V.B. and V.C. below are satisfied (the "Take Out Closing Date"). Bullet maturity on the date that is eighteen months after the Take-Out Closing Date.

Availability:

Amortization:

(b)Term A Facility Type of Facility: Term A Loan Facility: a five year senior, secured term loan facility in the aggregate principal amount of $200,000,000 (the "Term A Loan Facility"). The Term A Loan Facility shall be available in a single drawing on the date upon which the conditions precedent to such borrowing set forth in Articles V.A. and V.C. below are satisfied. To be mutually agreed upon.

Availability:

Amortization: (c)Term B Facility Type of Facility:

Term B Loan Facility: a six year senior, secured term loan facility in the aggregate principal amount of $250,000,000 (the "Term B Loan Facility", and, together with the Eighteen Month Facility and the Term A Loan Facility, the "Term Loan Facilities"). The Term B Loan Facility shall be available in a single drawing on the date upon which the conditions precedent to such borrowing set forth in Articles V.A. and V.C. below are satisfied. 7

Availability:

Amortization:

1% of amount of facility in each of the first

drawing of the Tender Offer Loan and (b) the date consummation of the Merger occurs. Use of Proceeds: The proceeds of the loans under the Tender Offer Facility (the "Tender Offer Loans") shall be used by the Borrower to (a) pay for the purchase of Shares tendered and purchased pursuant to the Tender Offer at a purchase price not greater than the price per Share previously identified by you to us, (b) refinance certain indebtedness of Company and Target previously identified by Company to the Administrative Agent, (c) provide for the working capital needs of Company during this period, and (d) pay for Transaction fees and expenses in connection with the Transaction.

B.Take-Out Facilities:

1.Term Loan Facilities: (a)Eighteen Month Facility
Type of Facility: Eighteen Month Facility: an eighteen month senior, secured term loan facility in the aggregate principal amount of $150,000,000 (the "Eighteen Month Facility"). The Eighteen Month Facility shall be available in a single drawing on the date upon which the conditions precedent to such borrowing set forth Articles V.B. and V.C. below are satisfied (the "Take Out Closing Date"). Bullet maturity on the date that is eighteen months after the Take-Out Closing Date.

Availability:

Amortization:

(b)Term A Facility Type of Facility: Term A Loan Facility: a five year senior, secured term loan facility in the aggregate principal amount of $200,000,000 (the "Term A Loan Facility"). The Term A Loan Facility shall be available in a single drawing on the date upon which the conditions precedent to such borrowing set forth in Articles V.A. and V.C. below are satisfied. To be mutually agreed upon.

Availability:

Amortization: (c)Term B Facility Type of Facility:

Term B Loan Facility: a six year senior, secured term loan facility in the aggregate principal amount of $250,000,000 (the "Term B Loan Facility", and, together with the Eighteen Month Facility and the Term A Loan Facility, the "Term Loan Facilities"). The Term B Loan Facility shall be available in a single drawing on the date upon which the conditions precedent to such borrowing set forth in Articles V.A. and V.C. below are satisfied. 7

Availability:

Amortization:

1% of amount of facility in each of the first five years after the Take-Out Closing Date; 95% of amount of facility in the sixth year after the Take-Out Closing Date.

Amortization:

1% of amount of facility in each of the first five years after the Take-Out Closing Date; 95% of amount of facility in the sixth year after the Take-Out Closing Date. The proceeds of the loans under the Term Loan Facilities (the "Term Loans") shall be used by the Borrower and its subsidiaries to (a) provide, on the same terms and conditions as provided for in the Tender Offer, for the "cash out" payment at not more than the price per Share previously identified by you to us for all outstanding Shares not tendered and purchased pursuant to the Tender Offer, (b) refinance the Tender Offer Loans and (c) refinance certain indebtedness of the Company.

(d) Use of Proceeds of the "Term Loan Facilities:

2. Revolving Credit Facility:
Type of Facility: A secured revolving credit facility in the aggregate principal amount of $150,000,000 (the "Revolving Credit Facility", and, together with the Term Loan Facilities, the "Take-Out Facilities", and, together with the Tender Offer Facility, the "Credit Facilities"), pursuant to which (a) loans may be borrowed, repaid and reborrowed by the Borrower (the "Revolving Loans", and, together with the Tender Offer Loans and the Term Loans, the "Loans") and (b) letters of credit may be issued, reimbursed and re-issued on behalf of the Borrower, subject to the subfacility limit described below (the "Letters of Credit"). The Revolving Credit Facility shall be available on a revolving basis during the period commencing on the Take-Out Closing Date and ending on the fifth anniversary thereof (the "Termination Date").

Availability:

Letter of Credit Sub-Facility Availability:
Outstanding Letters of Credit and related reimbursement obligations may not at any time exceed an aggregate amount to be agreed upon. Each issuance of a Letter of Credit will constitute usage under the Revolving Credit Facility and will reduce availability of Revolving Loans dollar for dollar. Letters of Credit must expire on the earlier of (a) one year from the date of issuance and (b) five days prior to the Termination Date. Drawings under each Letter of Credit shall be reimbursed by the Borrower on the same business day. To the extent that the Borrower does not so reimburse the Letter of Credit Issuer, the Lenders under the Revolving Credit Facility shall be irrevocably and unconditionally obligated to reimburse the Letter of Credit Issuer on a pro rata basis. Maturity: Use of Proceeds: Five years from the Take-Out Closing Date. The proceeds of the loans under the Revolving Credit Facility (the "Revolving Loans") shall be used by the Borrower and its subsidiaries to (a) refinance the Tender Offer Loans, (b) refinance certain indebtedness, finance capital expenditures, certain permitted acquisitions and for working capital and general

for working capital and general 8

corporate purposes, and (c) pay for Transaction fees and expenses in an amount which, when added to the amount of Transaction fees and expenses paid for out of proceeds of the Tender Offer Loans, do not exceed approximately $50 million. The Letters of Credit shall be used by the Borrower and its subsidiaries for working capital purposes.

III. General Payment Provisions
Fees and Interest Rates: Optional Prepayments and Commitment Reductions: As set forth on Annex I hereto. Loans may be prepaid and commitments may be reduced by the Borrower in minimum amounts and in integral multiples to be mutually agreed upon, without premium or penalty, but subject to breakage costs. Proceeds shall be applied to the Term Facilities and then to the Revolving Credit Facility. Customary for financings of this type, including on account of (a) 100% of net insurance and condemnation proceeds paid on account of the loss of or damage to or the condemnation of, as the case may be, any asset of the Borrower or any of its subsidiaries not used in certain permitted situations to repair, restore or replace such asset within a period to be agreed upon, (b) 100% of the net proceeds of permitted asset sales by the Borrower and its subsidiaries (except for those in the ordinary course of business), (c) 100% of the net cash proceeds of debt issuances and 50% (but 100% prior to the Take-Out Closing Date) of the net cash proceeds of public and private equity issuances of the Borrower and its subsidiaries and any parent company and (d) 50% of Excess Cash Flow (to be defined). All such reductions after the Take-Out Closing Date shall be applied first to the Term Facility (and within the Term Facility, first to the Eighteen Month Facility) and then to the Revolving Credit Facility. At such time as the Eighteen Month Facility has been paid in full and either (x) a certain mutually agreeable Debt to EBITDA Ratio has been achieved or (y) Company achieves an investment grade rating on its senior unsecured unsupported long-term debt by either Standard & Poor's Ratings Group or Moody's Investors Service, Inc., certain of the foregoing prepayment requirements will be reduced or eliminated.

Mandatory Prepayments and Commitment Reductions:

IV. Guarantees and Collateral Guarantees: Each of the material direct and indirect subsidiaries of Company (the "Guarantors", and, together with Company, the "Credit Parties") shall guarantee the Credit Facilities, subject to exceptions to be mutually agreed upon (including, for example, non-U.S. subsidiaries shall not be required to deliver guarantees to the extent it would result in material increased tax or similar liabilities for Company and its subsidiaries on a consolidated basis). After payment in full of the Eighteen Month Facility and either (x) achievement of a Debt to EBITDA Ratio to be

corporate purposes, and (c) pay for Transaction fees and expenses in an amount which, when added to the amount of Transaction fees and expenses paid for out of proceeds of the Tender Offer Loans, do not exceed approximately $50 million. The Letters of Credit shall be used by the Borrower and its subsidiaries for working capital purposes.

III. General Payment Provisions
Fees and Interest Rates: Optional Prepayments and Commitment Reductions: As set forth on Annex I hereto. Loans may be prepaid and commitments may be reduced by the Borrower in minimum amounts and in integral multiples to be mutually agreed upon, without premium or penalty, but subject to breakage costs. Proceeds shall be applied to the Term Facilities and then to the Revolving Credit Facility. Customary for financings of this type, including on account of (a) 100% of net insurance and condemnation proceeds paid on account of the loss of or damage to or the condemnation of, as the case may be, any asset of the Borrower or any of its subsidiaries not used in certain permitted situations to repair, restore or replace such asset within a period to be agreed upon, (b) 100% of the net proceeds of permitted asset sales by the Borrower and its subsidiaries (except for those in the ordinary course of business), (c) 100% of the net cash proceeds of debt issuances and 50% (but 100% prior to the Take-Out Closing Date) of the net cash proceeds of public and private equity issuances of the Borrower and its subsidiaries and any parent company and (d) 50% of Excess Cash Flow (to be defined). All such reductions after the Take-Out Closing Date shall be applied first to the Term Facility (and within the Term Facility, first to the Eighteen Month Facility) and then to the Revolving Credit Facility. At such time as the Eighteen Month Facility has been paid in full and either (x) a certain mutually agreeable Debt to EBITDA Ratio has been achieved or (y) Company achieves an investment grade rating on its senior unsecured unsupported long-term debt by either Standard & Poor's Ratings Group or Moody's Investors Service, Inc., certain of the foregoing prepayment requirements will be reduced or eliminated.

Mandatory Prepayments and Commitment Reductions:

IV. Guarantees and Collateral Guarantees: Each of the material direct and indirect subsidiaries of Company (the "Guarantors", and, together with Company, the "Credit Parties") shall guarantee the Credit Facilities, subject to exceptions to be mutually agreed upon (including, for example, non-U.S. subsidiaries shall not be required to deliver guarantees to the extent it would result in material increased tax or similar liabilities for Company and its subsidiaries on a consolidated basis). After payment in full of the Eighteen Month Facility and either (x) achievement of a Debt to EBITDA Ratio to be mutually determined or (y) achievement of an investment grade rating on 9

the senior unsecured unsupported long-term debt of Company by either Standard & Poor's Ratings Group or Moody's Investors Service, Inc., all of such guaranties will be released. Collateral: The Credit Facilities shall be secured by (a) a first-priority pledge of material assets of the Company and its subsidiaries, including the assets purchased in connection with the financing, (b) a first-priority perfected security interest on all capital stock of the Company's material existing and future subsidiaries (including all joint venture interests), including the Shares purchased pursuant to the Tender Offer; provided that no more than 65% of the equity interests of non-U.S. subsidiaries will be required to be pledged as security in the event that a pledge of a greater percentage would result in material increased tax or similar liabilities for Company and its subsidiaries on a consolidated basis and (c) a first-priority perfected security interest in all of the present and future material assets of the Company and its material and future subsidiaries. After payment in full of the Eighteen Month Facility and either (x) achievement of a Debt to EBITDA Ratio to be mutually determined or (y) achievement of an investment grade rating on the senior unsecured unsupported long-term debt of Company by either Standard & Poor's Ratings Group or Moody's Investors Service, Inc., all of such collateral will be released.

V.Certain Conditions A. Conditions to the Tender Offer Facility: The availability of the Tender Offer Facility shall be conditioned upon the substantially concurrent satisfaction of customary conditions for financings of this nature, including the following conditions precedent, on or before February 29, 2000: 1. Execution and delivery of satisfactory credit, guarantee, security and other related documentation embodying the structure, terms and conditions of the Tender Offer Facility contained herein (collectively, the "Tender Offer Credit Documentation"). 2. The Tender Offer shall have been consummated (a) at a price not exceeding the price per Share previously identified by you to us, (b) such that a majority of the Shareholders of Target shall have elected the requisite number of board of directors to approve the Merger and such majority Shareholders shall take all requisite actions to amend "poison pill," "shark repellant" or other similar items (including such actions so that the Tender Offer is approved pursuant to Section 203 of the Delaware General Corporation Law or the Administrative Agent being satisfied that the provisions of such Section 203 are invalid or inapplicable to the Tender Offer and Merger (by action of Target's Board of Directors or otherwise)) that could prevent or delay the Merger and (c) such that (i) AcquisitionCo shall have accepted for purchase Shares which were validly 10

the senior unsecured unsupported long-term debt of Company by either Standard & Poor's Ratings Group or Moody's Investors Service, Inc., all of such guaranties will be released. Collateral: The Credit Facilities shall be secured by (a) a first-priority pledge of material assets of the Company and its subsidiaries, including the assets purchased in connection with the financing, (b) a first-priority perfected security interest on all capital stock of the Company's material existing and future subsidiaries (including all joint venture interests), including the Shares purchased pursuant to the Tender Offer; provided that no more than 65% of the equity interests of non-U.S. subsidiaries will be required to be pledged as security in the event that a pledge of a greater percentage would result in material increased tax or similar liabilities for Company and its subsidiaries on a consolidated basis and (c) a first-priority perfected security interest in all of the present and future material assets of the Company and its material and future subsidiaries. After payment in full of the Eighteen Month Facility and either (x) achievement of a Debt to EBITDA Ratio to be mutually determined or (y) achievement of an investment grade rating on the senior unsecured unsupported long-term debt of Company by either Standard & Poor's Ratings Group or Moody's Investors Service, Inc., all of such collateral will be released.

V.Certain Conditions A. Conditions to the Tender Offer Facility: The availability of the Tender Offer Facility shall be conditioned upon the substantially concurrent satisfaction of customary conditions for financings of this nature, including the following conditions precedent, on or before February 29, 2000: 1. Execution and delivery of satisfactory credit, guarantee, security and other related documentation embodying the structure, terms and conditions of the Tender Offer Facility contained herein (collectively, the "Tender Offer Credit Documentation"). 2. The Tender Offer shall have been consummated (a) at a price not exceeding the price per Share previously identified by you to us, (b) such that a majority of the Shareholders of Target shall have elected the requisite number of board of directors to approve the Merger and such majority Shareholders shall take all requisite actions to amend "poison pill," "shark repellant" or other similar items (including such actions so that the Tender Offer is approved pursuant to Section 203 of the Delaware General Corporation Law or the Administrative Agent being satisfied that the provisions of such Section 203 are invalid or inapplicable to the Tender Offer and Merger (by action of Target's Board of Directors or otherwise)) that could prevent or delay the Merger and (c) such that (i) AcquisitionCo shall have accepted for purchase Shares which were validly 10

tendered (and not withdrawn) and which when

tendered (and not withdrawn) and which when added to the Shares already held by AcquisitionCo constitute at least 50.1% (on a fully diluted basis) of the issued and outstanding common stock of Target and (ii) the Rights have been redeemed by Target's Board of Directors, or the Administrative Agent otherwise shall be satisfied that such Rights are otherwise invalid or inapplicable to the transactions contemplated by the Tender Offer. There shall not exist (a) any order, decree, judgment, ruling or injunction which restrains the consummation of the Credit Facilities or the consummation of the Tender Offer or Merger in the manner contemplated hereby, and (b) any pending or threatened action, suit, investigation or proceeding which would reasonably be expected to materially and adversely affect the Borrower and its subsidiaries, taken as a whole, or Target and its subsidiaries, taken as a whole, any transaction contemplated hereby or the ability of the Borrower and its subsidiaries to perform their obligations under the documentation for the Credit Facilities or the ability of the Lenders to exercise their rights thereunder. The documentation for, and the terms and conditions of, the Tender Offer and the Proxy Solicitation shall not be modified, amended or waived in any material respect without the prior written consent of the Administrative Agent. 3. The Administrative Agent shall have received a duly completed Federal Reserve Form U-1 in connection with the Tender Offer and shall be satisfied that the Tender Offer Facility will be in full compliance with Regulation U. 4. The Administrative Agent shall be satisfied that AcquisitionCo is a single purpose acquisition vehicle that has been and will be "sterilized", preventing it from engaging in any business activity, other than holding the stock of Target (and no changes in its corporate structure, including the creation of any new subsidiaries or the merging or liquidation of any existing subsidiaries, shall be permitted without the consent of the Administrative Agent and the Lenders). 5. All amounts outstanding under the debt agreements refinanced pursuant to the Refinancing shall have been repaid in full (and all commitments to make extensions of credit thereunder shall have been terminated) and all liens, if any, with respect thereto shall have been released, in each case on terms reasonably satisfactory to the Administrative Agent and the Administrative Agent shall be reasonably satisfied that concurrent with the closing of the Credit Facilities, all pre-existing secured debt of the Company and its subsidiaries (other than capital leases and other indebtedness to be mutually agreed upon) shall be repaid in full. No other indebtedness shall exist at the operating 11

company level (other than existing capital leases and certain guarantees).

company level (other than existing capital leases and certain guarantees). 6. The capital structure (including, without limitation, the terms and amount of each component thereof) of the Company and its subsidiaries (including Target) immediately before and after each aspect of the Transaction and the equity contribution by Borrower to AcquisitionCo in an amount not less than $350,000,000 to be used for the purchase of the tendered Shares (and such amount shall be applied in full to such purchase prior to any drawing under the Credit Facilities) shall be satisfactory in all respects to the Administrative Agent. 7. The Lenders and the Administrative Agent shall have received all fees required to be paid on or before the Tender Offer Closing Date and all expenses in connection herewith and therewith. 8. All governmental and third party approvals necessary or advisable in connection with the Transaction (including the financing contemplated hereby) and the continuing operations of Company and its subsidiaries (after giving effect to the consummation of the Transaction), including Hart-Scott Rodino filings, shall have been obtained and be in full force and effect and all applicable waiting periods shall have expired without any action being taken or threatened by any competent authority which would restrain, prevent or otherwise impose adverse conditions on the Transaction or the financing thereof; and the prompt consummation of the Merger after the Tender Offer Closing Date could not reasonably be expected to be restrained, prevented or otherwise subject to material adverse conditions. 9. No material adverse change in the business, assets, financial condition, revenues, tax position, debt service capacity, operations or prospects of any of the Borrower or any of its subsidiaries including Target, taken as a whole, since the date of their latest audited financial statements. 10. The Lenders shall have received (a) guarantees and first-priority security interests, as set forth above under the captions "Guarantees" and "Collateral", respectively, in each case to the satisfaction of the Administrative Agent and (b) the results of a recent lien search in each of the jurisdictions and offices where assets constituting Collateral are located or recorded and such search shall reveal no liens on any such assets except to the extent consented to by the Administrative Agent. 11. The Lenders shall have received a letter agreement from the Company that suspends its ability to borrow under the existing credit facility agented by Bank with Company so long as the Commitment Letter is in effect, in form and 12

substance reasonably satisfactory to the

substance reasonably satisfactory to the Administrative Agent. 12. The Lenders shall have received such opinions (including (a) legal opinions (including, without limitation, opinions relating to the Tender Offer) and (b) copies of a customary "fairness" opinion), instruments, certificates (including solvency certificates) and other documents as are customary for transactions of this type or as they may reasonably request. B. Conditions to the Take-Out Facilities: The availability of the Take-Out Facilities shall be conditioned upon the substantially concurrent satisfaction of customary conditions for financings of this nature, including the following conditions precedent, on or before the 90th day following the Tender Offer Closing Date: 1. Execution and delivery of satisfactory credit, guarantee, security and other related documentation embodying the structure, terms and conditions of the Credit Facilities contained herein (collectively, the "Take-Out Credit Documentation", and, together with the Tender Offer Credit Documentation, the "Credit Documentation"). 2. The Merger shall have been consummated and no provision of the tender offer materials relating thereto thereof shall have been waived, amended, supplemented or otherwise modified in a manner which could reasonably be expected to be materially adverse to the rights or interests of the Administrative Agent or the Lenders. 3. The Administrative Agent shall be reasonably satisfied with all aspects of the Transaction consummated on the Take-Out Closing Date, including, without limitation, the aggregate sources and uses of proceeds utilized to consummate the same (including fees and expenses previously paid in connection with the Tender Offer, together with all fees and expenses payable in connection with the TakeOut Facilities and the Merger, not exceeding approximately $50 million in the aggregate) and the terms of all agreements and documents relating to the Transaction. 4. No material adverse change in the business, assets, financial condition, revenues, tax position, debt service capacity, operations or prospects of the Borrower and its subsidiaries including Target, taken as a whole, since the date of their last audited financial statements. 5. The Lenders and the Administrative Agent shall have received all fees required to be paid on or before the Take-Out Closing Date and all expenses in connection herewith and therewith. 6. The Lenders shall have received satisfactory unaudited interim consolidated financial statements for each quarterly period ended prior to the Take-Out Closing Date of 13

Company and its subsidiaries and of Target and its subsidiaries.

Company and its subsidiaries and of Target and its subsidiaries. 7. The Lenders shall have received a satisfactory pro forma consolidated balance sheet of Company (inclusive of Target and its subsidiaries) as at the date of the most recent consolidated balance sheet delivered pursuant to paragraph 6 above, adjusted to give effect to the consummation on the Take-Out Closing Date of the Transaction (including the financings contemplated hereby). 8. The Lenders shall have received guarantees and first-priority security interests, as set forth above under the captions "Guarantees" and "Collateral", respectively, as well as an insurance broker's letter, in each case to the reasonable satisfaction of the Administrative Agent. 9. The Lenders shall have received environmental reports (including Phase I reports) on all material real properties on which mortgages shall be required to be provided to the Administrative Agent from independent consultants satisfactory to the Administrative Agent, which reports shall be reasonably satisfactory in all respects to the Administrative Agent and shall expressly permit the Administrative Agent and the Lenders to rely thereon, and the coverage of any issues disclosed in such reports shall be reasonably satisfactory to the Administrative Agent. 10. The Lenders shall have received (a) satisfactory audited consolidated financial statements for the three most recent fiscal years ended prior to the Take-Out Closing Date of Company and its subsidiaries and of Target and its subsidiaries and (b) satisfactory unaudited interim consolidated financial statements for each quarterly period ended subsequent to the date of the latest financial statements delivered pursuant to clause (a) of this paragraph as to which such financial statements are available of Company and its subsidiaries and of Target and its subsidiaries. 11. The Lenders shall have received a satisfactory business plan for fiscal year 2000, satisfactory financial projections for the term of the Credit Facilities and a satisfactory written analysis of the business and prospects of Company and its subsidiaries (including Target and its subsidiaries) for the term of the Credit Facilities. 12. The Lenders shall have received such opinions (including legal opinions (including, without limitation, opinions relating to the Merger)), instruments, certificates (including solvency certificates) and other documents as are customary for transactions of this type or as they may reasonably request.

14
C. Conditions to each Credit Extension: The making of each extension of credit (including the initial loans under the Tender Offer Facility and the Take-Out Facilities) shall be conditioned

C. Conditions to each Credit Extension:

The making of each extension of credit (including the initial loans under the Tender Offer Facility and the Take-Out Facilities) shall be conditioned upon (a) all representations and warranties in the Credit Documentation (including, without limitation, the material adverse change and litigation representations) being true and correct in all material respects and (b) there being no default or event of default in existence at the time of, or after giving effect to the making of, such extension of credit. The Credit Documentation shall contain representations, warranties, covenants and events of default applicable to the Borrower and each other Credit Party and their respective subsidiaries customary for financings of this type and other terms reasonably deemed appropriate by the Lenders, including, without limitation: Accuracy of financial statements (including pro forma financial statements); absence of undisclosed liabilities; no material adverse change; corporate existence; compliance with law; corporate power and authority; authorization by Board of Directors of the Borrower; enforceability of Credit Documentation; no conflict with law or material contractual obligations; no material litigation; absence of any material obligations or liabilities of the subsidiaries; no default; ownership of property; liens; intellectual property; no burdensome restrictions; taxes; compliance with Regulations T and U and other Federal Reserve regulations; existence and validity of all material governmental consents and permits; ERISA; Investment Company Act; environmental matters; accuracy of disclosure; creation, perfection and priority of security interests and Year 2000 matters. Delivery of financial statements, reports, accountants' letters, projections, officers' certificates and other information requested by the Lenders; payment of other obligations; continuation of business and maintenance of existence and material rights and privileges; compliance with laws and material contractual obligations; maintenance of property and insurance; maintenance of books and records; right of the Lenders to inspect property and books and records; notices of defaults, litigation and other material events; maintenance of capital expenditures and compliance with environmental laws. Certain of the affirmative covenants shall be subject to customary "baskets" to be mutually agreed upon. Financial Covenants shall be comprised of EBITDA/Interest, Debt/EBITDA and limitation on capital expenditures. Customary for financing of this type, including without limitation, limitations on: indebtedness (including preferred stock); liens; guarantee obligations; mergers, consolidations, liquidations and dissolutions; sales of assets; leases; dividends and other payments in respect of capital stock; capital expenditures; 15

VI. Representations, Warranties, Covenants and Events of Default

Representations and Warranties:

Affirmative Covenants:

Financial Covenants:

Negative Covenants:

investments, loans and advances; payments and modifications of subordinated and other debt instruments; no material modification of tender offer or merger documentation; transactions with affiliates; sale and leasebacks; changes in fiscal year; negative pledge clauses; and changes in lines of business. Certain of the negative covenants shall be subject to customary "baskets" to be mutually agreed upon. Events of Default: Nonpayment of principal when due; nonpayment of interest, fees or other amounts; material inaccuracy of representations and warranties; violation of covenants (subject, in the case of certain affirmative covenants, to a 30-day grace period); cross-default to any other indebtedness of the Borrower; bankruptcy of Borrower, a restricted subsidiary or any other material subsidiary; certain ERISA events; material judgments; actual or asserted invalidity of any guarantee or security document, subordination provisions or security interest; failure of the Merger to occur by April 30, 2000; and a change of control. Certain of the events of default shall include customary grace periods and/or baskets to be mutually agreed upon.

VII.Certain Other Terms Voting: Amendments and waivers with respect to the Credit Documentation shall require the approval of Lenders holding commitments representing not less than a majority of the aggregate amount of the commitments under the Credit Facilities (the "Required Lenders"), except that (a) the consent of each Lender directly affected thereby shall be required with respect to certain customary issues and (b) the consent of 100% of the Lenders shall be required with respect to certain customary issues. The Credit Documentation will contain customary tranche voting provisions. The Lenders shall be permitted to assign and sell participations in their Facilities to affiliates or one or more banks, financial institutions or other entities that are eligible assignees, subject, in the case of assignments (other than to another Lender or to an affiliate of the assigning Lender), to the consent of the Administrative Agent and Borrower (which consent in each case shall not be unreasonably withheld and, in the case of the Borrower, shall not be required during a default or event of default) and to the payment by the assigning Lender to the Administrative Agent of a $3,500 transfer fee. In the case of partial assignments, the minimum assignment amount shall be $5,000,000 (unless, in each case, an assigning Lender's aggregate interest is less than $5,000,000, in which case the full amount remaining may be assigned) and, after giving effect thereto, the assigning Lender shall have commitments and Loans aggregating at least $5,000,000. Upon such assignment, such affiliate entity shall become a Lender for all purposes of the loan documentation. Participants shall have the same benefits as the Lenders with respect to yield protection and increased cost 16

Assignments and Participations:

provisions. Voting rights of participants shall be limited to certain customary issues. Pledges of Loans in accordance with applicable law shall

provisions. Voting rights of participants shall be limited to certain customary issues. Pledges of Loans in accordance with applicable law shall be permitted without restriction. Yield Protection: The Credit Documentation shall contain customary provisions (a) protecting the Lenders against loss of yield resulting from changes in reserve, tax, capital adequacy, funding losses, illegality, changes to existing regulations and other requirements of law and from the imposition of withholding or other taxes (collectively, "increased costs") and (b) indemnifying the Lenders for "breakage costs" incurred in connection with, among other things, prepayment of a Eurodollar Loan (as defined in Annex I) on a day other than the last day of an interest period with respect thereto. The Borrower shall pay (a) all reasonable out-ofpocket expenses of the Administrative Agent associated with the syndication of the Credit Facilities and the preparation, execution, delivery and administration of the Credit Documentation and any amendment or waiver with respect thereto and all other aspects of the Transaction (including the reasonable fees and disbursements and other charges of counsel) and (b) all out-of-pocket expenses of the Administrative Agent and the Lenders in connection with the enforcement of the Credit Documentation (including the fees and disbursements and other charges of counsel). The Borrower shall indemnify, pay and hold harmless the Administrative Agent, the Arranger and the Lenders (and their respective directors, officers, employees and agents) against any loss, liability, cost or expense in respect of any aspect of the Transaction, the financing contemplated hereby or the use or the proposed use of proceeds thereof (except to the extent resulting from the gross negligence or willful misconduct of the indemnified party). Governing Law and Forum: Counsel to the State of New York. Mayer, Brown & Platt.

Expenses and Indemnification:

Administrative Agent: This indicative Term Sheet is intended as an outline only and does not purport to summarize all the conditions, covenants, representations, warranties and other provisions which would be contained in the definitive credit documentation. 17

ANNEX I to EXHIBIT A INTEREST AND CERTAIN FEES
Interest Rate Options: The Borrower may elect that all or a portion of the Loans borrowed by it bear interest at a rate per annum equal to (a) the Alternate Base Rate plus the Applicable Margin with respect thereto or (b) the Eurodollar Rate plus the Applicable

ANNEX I to EXHIBIT A INTEREST AND CERTAIN FEES
Interest Rate Options: The Borrower may elect that all or a portion of the Loans borrowed by it bear interest at a rate per annum equal to (a) the Alternate Base Rate plus the Applicable Margin with respect thereto or (b) the Eurodollar Rate plus the Applicable Margin with respect thereto. For purposes hereof: "Alternate Base Rate" means the higher of (i) the rate of interest established by Bank as its base or prime rate in effect at its principal office in New York City (the "Prime Rate") and (ii) the federal funds effective rate from time to time plus .50%; "Eurodollar Rate" means the rate (grossed-up for maximum statutory reserve requirements for eurocurrency liabilities) at which eurocurrency deposits in U.S. dollars for one, two, three or six months, or if available to all banks, nine or twelve months (as selected by the Borrower) are offered by Bank in the London interbank eurocurrency market; provided that the Tender Offer Loan may not be converted/continued as a Eurodollar Loan having an interest period of more than three months. Applicable Margin: The Applicable Margin with respect to the Tender Offer Facility shall be (a) initially 275 basis points (until 2 months after the Tender Offer Closing Date), such rate to increase by 25 basis points if not repaid within 2 months of the Tender Offer Closing Date and shall increase by another 25 basis points thereafter until repaid with respect to Loans bearing interest based on the Eurodollar Rate ("Eurodollar Loans") and (b) initially 175 basis points (until 2 months after the Tender Offer Closing Date), such rate to increase by 25 basis points if not repaid within 2 months after the Tender Offer Closing Date and to increase by another 25 basis points thereafter until repaid with respect to Loans bearing interest based on the Alternate Base Rate ("Base Rate Loans"). The Applicable Margin with respect to (a) the Revolving Credit Facility, the Eighteen Month Facility and the Term A Facility shall initially be 250 basis points with respect to Eurodollar Loans and 150 basis points with respect to Base Rate Loans and the Term B Facility shall be 275 basis points with respect to Eurodollar Loans and 175 with respect to Base Rate Loans. Reductions in the Applicable Margin with respect to the Revolving Facility, the Eighteen Month Facility, the Term A Facility and, to some extent, the Term B Facility shall be available in a manner to be determined and based on the Debt/EBITDA Ratio (to be defined). 18

Interest Payment Dates:

In the case of Base Rate Loans, in arrears on the last business day of each calendar quarter.

Interest Payment Dates:

In the case of Base Rate Loans, in arrears on the last business day of each calendar quarter. In the case of Eurodollar Loans, on the last day of each relevant interest period and, in the case of any interest period longer than three months, on each successive date three months after the first day of such interest period.

Commitment Fees:

The Borrower shall pay to the Administrative Agent, for the ratable benefit of the Lenders, a commitment fee on the average daily unused portion of the Credit Facilities, payable quarterly in arrears on the last business day of each calendar quarter, and calculated (a) during the first 180 days of the Credit Facilities, at 40 basis points per annum and (b) thereafter, reductions thereon calculated based on the Debt/EBITDA Ratio (to be determined). The Borrower shall pay to the Administrative Agent, for the ratable benefit of the Lenders, a letter of credit fee on the aggregate amount available under outstanding Letters of Credit, payable in arrears on the last business day of each calendar quarter, and calculated at a per annum rate equal to the Applicable Margin under the Revolving Credit Facility with respect to Eurodollar Loans from time to time in effect. The Borrower shall also pay to the Letter of Credit Issuer, for its own account, a letter of credit fronting fee on the aggregate amount available under each Letter of Credit issued, payable in arrears on the last business day of each calendar quarter, and calculated at a per annum rate to be determined. At any time when the Borrower is in default in the payment of any amount due under the Credit Facilities or any other event of default shall have occurred and be continuing, the principal of all Loans shall bear interest at 2% above the rate otherwise applicable thereto. Overdue interest, fees and other amounts shall bear interest at the rate applicable to Base Rate Loans plus the applicable margin plus 2%. All per annum rates shall be calculated on the basis of a year of 360 days (or 365/366 days, in the case of Base Rate Loans the interest rate payable on which is then based on the Prime Rate) for actual days elapsed.

Letter of Credit Fees:

Default Rate:

Rate and Fee Basis:

19

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

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. 1

(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

(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. 2

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;

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. 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 3

(f) to the best of Ariel's knowledge: Ariel's Clients are the legal and beneficial owners of the respective Purchased

(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 4

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

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). 5

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 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] 6

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/ Franklin L. Morton By:__________________________________ Title: Senior Vice President

/s/ Andrew J. Kohut By:__________________________________ Title: Senior Vice President

7

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY CHESAPEAKE CORPORATION and SHEFFIELD, INC., Plaintiffs, v. No. MARC P. SHORE, HOWARD M. LIEBMAN, ANDREW N. SHORE, LEONARD J. VEREBAY, VIRGINIA A. KAMSKY, SHARON R. FAIRLEY, R. TIMOTHY O'DONNELL, KEVIN J. BANNON, WILLIAM P. WEIDNER, and SHOREWOOD PACKAGING CORPORATION, Defendants. COMPLAINT

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/ Franklin L. Morton By:__________________________________ Title: Senior Vice President

/s/ Andrew J. Kohut By:__________________________________ Title: Senior Vice President

7

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY CHESAPEAKE CORPORATION and SHEFFIELD, INC., Plaintiffs, v. No. MARC P. SHORE, HOWARD M. LIEBMAN, ANDREW N. SHORE, LEONARD J. VEREBAY, VIRGINIA A. KAMSKY, SHARON R. FAIRLEY, R. TIMOTHY O'DONNELL, KEVIN J. BANNON, WILLIAM P. WEIDNER, and SHOREWOOD PACKAGING CORPORATION, Defendants. COMPLAINT Plaintiffs Chesapeake Corporation ("Chesapeake") and Sheffield, Inc. ("Purchaser," jointly with Chesapeake, "Plaintiffs"), by and through its undersigned attorneys, upon knowledge as to themselves and their own acts and upon information and belief as to all other matters, allege for their complaint against Marc P. Shore, Howard M. Liebman, Andrew N. Shore, Leonard J. Verebay, Virginia A. Kamsky, Sharon R. Fairley, R. Timothy O'Donnell, Kevin J. Bannon, William P. Weidner (collectively, the "Director Defendants") and Shorewood Packaging Corporation ("Shorewood" or the "Company," together with the Director Defendants, the "Defendants"), as follows: NATURE OF THE ACTION 1. Plaintiffs commenced today a fully-financed, non-coercive, non- discriminatory, all-cash, all-shares premium tender offer for Shorewood's common stock at $17.25 per share (the "Tender Offer"). The $17.25 in cash offered in the Tender Offer represents approximately a 45% premium over the closing price of Shorewood's common stock on November 9, 1999, the last full trading day before Chesapeake made a confidential proposal to acquire Shorewood in a negotiated transaction at $16.50 per share. The $17.25 in cash offered in the Tender Offer represents more than a 28% premium above the closing price of Shorewood's stock on November 17, 1999, the last full trading day before Shorewood disclosed to the markets Chesapeake's confidential proposal. 2. The Tender Offer is the initial step in a two-step transaction pursuant to which Chesapeake proposes to acquire all of the outstanding shares of Shorewood. If successful, Chesapeake intends to follow the Tender Offer

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE IN AND FOR NEW CASTLE COUNTY CHESAPEAKE CORPORATION and SHEFFIELD, INC., Plaintiffs, v. No. MARC P. SHORE, HOWARD M. LIEBMAN, ANDREW N. SHORE, LEONARD J. VEREBAY, VIRGINIA A. KAMSKY, SHARON R. FAIRLEY, R. TIMOTHY O'DONNELL, KEVIN J. BANNON, WILLIAM P. WEIDNER, and SHOREWOOD PACKAGING CORPORATION, Defendants. COMPLAINT Plaintiffs Chesapeake Corporation ("Chesapeake") and Sheffield, Inc. ("Purchaser," jointly with Chesapeake, "Plaintiffs"), by and through its undersigned attorneys, upon knowledge as to themselves and their own acts and upon information and belief as to all other matters, allege for their complaint against Marc P. Shore, Howard M. Liebman, Andrew N. Shore, Leonard J. Verebay, Virginia A. Kamsky, Sharon R. Fairley, R. Timothy O'Donnell, Kevin J. Bannon, William P. Weidner (collectively, the "Director Defendants") and Shorewood Packaging Corporation ("Shorewood" or the "Company," together with the Director Defendants, the "Defendants"), as follows: NATURE OF THE ACTION 1. Plaintiffs commenced today a fully-financed, non-coercive, non- discriminatory, all-cash, all-shares premium tender offer for Shorewood's common stock at $17.25 per share (the "Tender Offer"). The $17.25 in cash offered in the Tender Offer represents approximately a 45% premium over the closing price of Shorewood's common stock on November 9, 1999, the last full trading day before Chesapeake made a confidential proposal to acquire Shorewood in a negotiated transaction at $16.50 per share. The $17.25 in cash offered in the Tender Offer represents more than a 28% premium above the closing price of Shorewood's stock on November 17, 1999, the last full trading day before Shorewood disclosed to the markets Chesapeake's confidential proposal. 2. The Tender Offer is the initial step in a two-step transaction pursuant to which Chesapeake proposes to acquire all of the outstanding shares of Shorewood. If successful, Chesapeake intends to follow the Tender Offer with a merger or similar business combination (the "Proposed Merger," together with the Tender Offer, the "Proposed Acquisition"), in which Shorewood's remaining stockholders will receive an amount in cash equal to the price paid in the Tender Offer. 3. Chesapeake also announced today its intention to solicit written consents from Shorewood's stockholders to take certain actions without a stockholder meeting (the "Consent Solicitation"). The purpose of the Consent Solicitation is to obtain sufficient written consents from Shorewood's stockholders in order to (i) amend Shorewood's Amended and Restated By-laws (the "Bylaws") to remove the provision establishing a staggered board of directors, (ii) remove all current members of

the Shorewood board of directors (the "Shorewood Board"), (iii) reduce the authorized number of Shorewood directors to three, (iv) elect to the Shorewood Board three independent candidates for director nominated by Chesapeake (the "Nominees"), and (v) repeal any recent or subsequent amendments to the Bylaws.

the Shorewood board of directors (the "Shorewood Board"), (iii) reduce the authorized number of Shorewood directors to three, (iv) elect to the Shorewood Board three independent candidates for director nominated by Chesapeake (the "Nominees"), and (v) repeal any recent or subsequent amendments to the Bylaws. 4. To commence the Tender Offer, Chesapeake prepared a press release summarizing the terms of the Tender Offer (the "Press Release") and placed a summary advertisement of the Tender Offer in the national edition of The Wall Street Journal (the "Summary Advertisement") for immediate publication in the next issue. These steps were completed and the Tender Offer and Consent Solicitation process set in motion at 3:00 p.m. yesterday. 5. After Chesapeake had completed these steps, and admittedly in response to the Chesapeake Proposal and in anticipation of the Consent Solicitation, Shorewood announced yesterday evening that the Director Defendants had amended the Bylaws to adopt various draconian provisions designed purposefully to interfere with the ability of Shorewood's stockholders to exercise their franchise rights (collectively, the "Bylaw Amendments"). Among other things, the Director Defendants amended the Bylaws to adopt a new Article X, which provides that "the by-laws may be amended, added to, altered or repealed, or new by-laws may be adopted ...... by the affirmative vote of the holders of not less than two thirds ( 2/3) of the stock issued and outstanding as of the record date" (the "Super-Majority Bylaw"). 6. The Super-Majority Bylaw is a blatant and undisguised effort by the Director Defendants to entrench themselves by disenfranchising Shorewood's stockholders. The Super-Majority Bylaw is a disproportionate and draconian defensive response and constitutes a breach of the Director Defendants' fiduciary duties. The SuperMajority Bylaw also is invalid and ultra vires under both the Shorewood certificate of incorporation (the "Charter") and Delaware law. 7. This action seeks declaratory relief invalidating the Bylaw Amendments and injunctive relief barring Shorewood or any of its directors, officers, agents or representatives from relying on, implementing, applying or enforcing the Bylaw Amendments. This action further seeks declaratory and injunctive relief requiring Shorewood to dismantle its takeover defenses, including its "poison pill," and enjoining Shorewood from amending the Bylaws further or taking any other action to defeat the Tender Offer and Proposed Merger or to thwart the stockholder franchise and frustrate the Consent Solicitation. THE PARTIES 8. Plaintiff Chesapeake is a corporation incorporated under the laws of the Commonwealth of Virginia with its principal executive offices located in Richmond, Virginia. Chesapeake is primarily engaged in the manufacture and sale of specialty packaging, point-of-purchase displays, and merchandising services. Chesapeake's shares are listed on the New York Stock Exchange. Chesapeake is the beneficial owner of shares representing 14.9% of Shorewood's common stock. 9. Plaintiff Purchaser is a corporation incorporated under the laws of the State of Delaware and a wholly-owned subsidiary of Chesapeake. Purchaser was formed to acquire all of the outstanding shares of Shorewood through the Proposed Acquisition. Purchaser is the record owner of 100 shares of Shorewood common stock. 10. Defendant Marc P. Shore ("Mr. Shore") is the Chairman and Chief Executive Officer of Shorewood. Mr. Shore is the son of Paul B. Shore, the founder of the Company. Mr. Shore owns beneficially 955,601 shares of Shorewood common stock. Through a network of trusts and investment partnerships created for the benefit of the Shore family, Mr. Shore controls and is deemed to hold 2

beneficially an additional 3,904,303 shares, more than four times his personal holdings. In the aggregate, Mr. Shore owns or controls shares representing 17.38% of the Company's outstanding common stock. In fiscal year 1999, Mr. Shore received $800,000 in salary, a bonus of $1,093,000, other compensation of $149,625, and restricted stock awards valued at $825,000, for a total compensation package immediately worth $2,867,625. He also received options to purchase an additional 350,000 shares of the Company's stock, which options the Company valued at $7,699,886 based on an estimated annual appreciation rate for the Company's stock of 10%. During the same year, the Company's share price dropped by 36.89% and yielded investors a one year

beneficially an additional 3,904,303 shares, more than four times his personal holdings. In the aggregate, Mr. Shore owns or controls shares representing 17.38% of the Company's outstanding common stock. In fiscal year 1999, Mr. Shore received $800,000 in salary, a bonus of $1,093,000, other compensation of $149,625, and restricted stock awards valued at $825,000, for a total compensation package immediately worth $2,867,625. He also received options to purchase an additional 350,000 shares of the Company's stock, which options the Company valued at $7,699,886 based on an estimated annual appreciation rate for the Company's stock of 10%. During the same year, the Company's share price dropped by 36.89% and yielded investors a one year total return of negative 19.14%. 11. Defendant Howard M. Liebman is President, Chief Financial Officer and a director of Shorewood. In fiscal year 1999, Mr. Liebman received $450,000 in salary, a bonus of $150,000, other compensation of $107,875, and restricted stock awards valued at $481,250, for a total compensation package immediately worth $1,189,125. Mr. Liebman also received options to purchase an additional 150,000 shares of the Company's stock, which options the Company valued at $3,287,094 based on an estimated annual appreciation rate for the Company's stock of 10%. 12. Defendant Andrew N. Shore is Vice President, General Counsel, Secretary and a director of Shorewood. Andrew Shore is the brother of Mr. Shore. Andrew Shore's compensation is not publicly disclosed. 13. Defendant Leonard J. Verebay is Executive Vice President and a director of Shorewood. Mr. Verebay's compensation is not publicly disclosed. 14. Defendant Virginia A. Kamsky is a director of Shorewood. Ms. Kamsky is the founder, chief executive officer, chairman and principal stockholder of Kamsky Associates, Inc. ("KAI"), which has advised Shorewood for approximately three years in connection with the establishment of a manufacturing facility in China. Pursuant to a consulting agreement, Shorewood paid KAI a consulting fee of $25,000 per month. KAI further is entitled to participate in up to 5% of Shorewood's allocable share of the "net profits," as defined in the relevant agreement, from the China facility. 15. Defendant R. Timothy O'Donnell is a director of Shorewood. Mr. O'Donnell is a President and a principal stockholder of Jefferson Capital Group, Ltd. ("Jefferson Capital"), an investment banking firm. Jefferson Capital receives substantial revenues from its services to Shorewood. For example, in November 1998, Shorewood paid Jefferson Capital a fee of approximately $1.3 million and awarded Jefferson Capital, effective as of October 13, 1998, a warrant to purchase 50,000 shares of Shorewood common stock at an exercise price of $16 per share, exercisable upon grant. 16. Defendant Kevin J. Bannon is a director of Shorewood. Mr. Bannon is an Executive Vice President of Bank of New York, a participant in the Company's lending syndicate that loans substantial sums to the Company and receives substantial revenues from the Company's business. For example, at the end of fiscal year 1999, the Company had aggregate borrowings from the Bank of New York in the amount of $25,039,500. The Bank of New York also acts as the Company's transfer agent. 17. Defendants Sharon R. Fairley and William P. Weidner are directors of Shorewood. 18. Defendant Shorewood is a corporation incorporated under the laws of the State of Delaware with its principal executive offices located in New York, New York. Shorewood and its subsidiaries print and manufacture paperboard packaging through operations in the United States, Canada and China. Shorewood's common stock is listed and traded on the New York Stock Exchange. 3

BACKGROUND Chesapeake Considers An Acquisition of Shorewood 19. In the ordinary course of business, Chesapeake engages in an ongoing evaluation of potential candidates for acquisitions and strategic transactions. As part of Chesapeake's business strategy of divesting capital intensive,

BACKGROUND Chesapeake Considers An Acquisition of Shorewood 19. In the ordinary course of business, Chesapeake engages in an ongoing evaluation of potential candidates for acquisitions and strategic transactions. As part of Chesapeake's business strategy of divesting capital intensive, cyclical commodity businesses and focusing on value-added, specialty packaging businesses, Chesapeake identified Shorewood as a potential acquisition candidate as early as May 1998. Chesapeake at no time considered a potential sale of Chesapeake to Shorewood. 20. In the first quarter of 1999, Chesapeake acquired Field Group plc (the "Field Acquisition"). As part of the Field Acquisition, Chesapeake and Shorewood discussed opportunities for alliances or transactions involving specific target markets or individual plants. Chesapeake and Shorewood did not discuss a potential strategic transaction or business combination involving the companies. 21. On October 26, 1999, Mr. Shore called Thomas H. Johnson, President and Chief Executive Officer of Chesapeake, and proposed an acquisition of Chesapeake by Shorewood, thereby recognizing the significant value inherent in a combination of the two companies. On October 27, 1999, Mr. Johnson received a letter from Mr. Shore dated October 26, 1999, that outlined the terms of a potential acquisition (the "Shorewood Proposal"). On October 29, 1999, Mr. Johnson informed Mr. Shore by letter that Chesapeake was not for sale, but that he would present the Shorewood Proposal to Chesapeake's board of directors (the "Chesapeake Board") and that the Chesapeake Board would consider carefully the Shorewood Proposal. 22. On November 3, 1999, the Chesapeake Board convened a special meeting to consider the Shorewood Proposal. The Chesapeake Board received presentations from Chesapeake's management regarding Chesapeake's performance and the Shorewood Proposal. The Chesapeake Board also received advice from its legal counsel and from Goldman, Sachs & Co. and Donaldson, Lufkin & Jenrette, co- financial advisors to the Chesapeake Board. After receiving and considering this information and advice, the Chesapeake Board unanimously determined that the Shorewood Proposal was inadequate and not in the best interests of Chesapeake and its stockholders. The Chesapeake Board instructed Mr. Johnson to communicate with Mr. Shore and inform him of the Chesapeake Board's decision to reject the Shorewood Proposal. 23. Also on November 3, 1999, the Chesapeake Board considered a potential acquisition of Shorewood as one of the strategic acquisitions available to Chesapeake. Among other things, the Board noted that such an acquisition was consistent with Chesapeake's strategic plan. The Chesapeake Board further considered that Chesapeake could unlock significant value in Shorewood's assets by applying Chesapeake's management and operational strategies and by incorporating an acquisition of Shorewood into other potential acquisitions being explored by Chesapeake. At the conclusion of the meeting, the Chesapeake Board authorized Mr. Johnson to propose an acquisition of Shorewood by Chesapeake (the "Chesapeake Proposal"). Shorewood Rejects The Chesapeake Proposal 24. On November 10, 1999, Mr. Johnson met with Mr. Shore and communicated the Chesapeake Board's decision regarding the Shorewood Proposal. Mr. Johnson then presented Mr. Shore with the Chesapeake Proposal. Mr. Johnson also provided Mr. Shore with a letter outlining the Chesapeake Proposal. Among other things, the letter noted that the Chesapeake Proposal was not subject to any financing condition and that Chesapeake was prepared to commence immediately good 4

faith negotiations on an exclusive basis with the objective of entering into a definitive merger agreement consistent with the Chesapeake Proposal. 25. Mr. Shore stated that he would communicate the proposal to the Shorewood Board but that any meeting would be a "very short one." Mr. Shore thus implied strongly that he was unwilling to accept or support the Chesapeake Proposal and that the Shorewood Board, dominated by insiders and individuals beholden to Mr. Shore, would follow his lead.

faith negotiations on an exclusive basis with the objective of entering into a definitive merger agreement consistent with the Chesapeake Proposal. 25. Mr. Shore stated that he would communicate the proposal to the Shorewood Board but that any meeting would be a "very short one." Mr. Shore thus implied strongly that he was unwilling to accept or support the Chesapeake Proposal and that the Shorewood Board, dominated by insiders and individuals beholden to Mr. Shore, would follow his lead. Shorewood Publicly Announces The Shorewood Proposal And The Chesapeake Proposal 26. On the morning of November 18, 1999, Mr. Shore delivered a letter to Mr. Johnson by facsimile in which he informed Mr. Johnson that the Shorewood Board had "unanimously and unequivocally rejected" the Chesapeake Proposal. The Shorewood Board thus had followed Mr. Shore's lead, just as Mr. Shore had intimated during the November 10, 1999 meeting. 27. Mr. Shore's letter also informed Mr. Johnson that Shorewood would publicize the Shorewood Proposal and the Chesapeake Proposal, notwithstanding Chesapeake's desire for the Chesapeake Proposal to remain confidential. Indeed, at the same time Mr. Shore was sending his letter to Mr. Johnson, Shorewood was issuing a press release announcing the Shorewood Proposal and publicly disclosing the confidential Chesapeake Proposal. 28. Later in the day on November 18, 1999, Chesapeake issued a press release confirming the existence of the Chesapeake Proposal and noting that Chesapeake was "prepared to commence immediate good faith negotiations on an exclusive basis with the objective of entering into a definitive merger agreement consistent with its proposal." Chesapeake Attempts To Negotiate With Shorewood 29. On November 22, 1999, Mr. Johnson sent a letter to the members of the Shorewood Board asking them to consider entering into immediate good faith negotiations with Chesapeake regarding the Chesapeake Proposal. Mr. Johnson noted the possibility of Chesapeake increasing its offer after appropriate due diligence and access to the Company's business plan, as well as the possibility of utilizing alternatives to an all-cash structure that could offer tax- advantages to certain of Shorewood's stockholders. Chesapeake also issued a press release announcing Mr. Johnson's letter. Shorewood did not respond to Mr. Johnson's letter. 30. On November 26, 1999, Chesapeake entered into a stock purchase agreement with Ariel Capital Management, Inc. ("Ariel") pursuant to which Ariel agreed to use its best efforts as an investment adviser to exercise its discretionary authority to cause Ariel's clients to sell approximately 4.1 million shares of Shorewood common stock, representing approximately 14.9% of Shorewood's outstanding shares, to Chesapeake. Ariel also agreed that if Chesapeake commenced a public tender offer for Shorewood's common stock prior to the closing of the purchase agreement, Ariel would use its best efforts as investment adviser to exercise its discretionary authority to cause its clients to (i) tender their shares to Chesapeake and (ii) execute any proxies or written consents in the form solicited by Chesapeake in any proxy or written consent solicitation commenced in connection with such tender offer. 31. On November 29, 1999, Chesapeake issued a press release announcing its agreement with Ariel and renewing its offer to the members of the Shorewood Board to meet and negotiate the terms of an acquisition of Shorewood by Chesapeake. That same day, Shorewood issued a press release rejecting Chesapeake's overtures. 5

Chesapeake Commences The Tender Offer And Consent Solicitation 32. Faced with the Director Defendants' intransigence, Plaintiffs today commenced the fully-financed, noncoercive, non-discriminatory, all-cash, all- shares premium Tender Offer. The Tender Offer is conditioned, among other things, upon (i) the tender and purchase of sufficient Shorewood shares to give Chesapeake and Purchaser a majority of the outstanding Shorewood shares on a fully diluted basis, (ii) the exemption of the

Chesapeake Commences The Tender Offer And Consent Solicitation 32. Faced with the Director Defendants' intransigence, Plaintiffs today commenced the fully-financed, noncoercive, non-discriminatory, all-cash, all- shares premium Tender Offer. The Tender Offer is conditioned, among other things, upon (i) the tender and purchase of sufficient Shorewood shares to give Chesapeake and Purchaser a majority of the outstanding Shorewood shares on a fully diluted basis, (ii) the exemption of the Tender Offer from Section 203 of the Delaware General Corporation Law ("Section 203") and (iii) the redemption or inapplicability of Shorewood's stockholder rights plan (the "Rights Plan"). 33. Chesapeake also announced today the Consent Solicitation. The purpose of the Consent Solicitation is to obtain sufficient consents from Shorewood's stockholders to take certain actions by written consent without a stockholder meeting, including (i) amending Shorewood's Bylaws to remove the provision establishing a staggered board of directors, (ii) removing all current members of the Shorewood Board, (iii) reducing the authorized number of Shorewood directors to three, (iv) electing the Nominees to the Shorewood Board, and (v) repealing any recent or subsequent amendments to the Bylaws. In furtherance of the Consent Solicitation, Purchaser is demanding that Shorewood produce a list of its stockholders and related stocklist materials. 34. If elected, the Nominees will consider, subject to their fiduciary duties to Shorewood's stockholders, (i) redeeming the Rights Plan (or amending the Rights Plan to make it inapplicable to the Proposed Acquisition), (ii) approving the Tender Offer under Section 203, and (iii) taking such other actions as may be required to expedite the prompt consummation of the Proposed Acquisition. Shorewood Discloses The Bylaw Amendments 35. To commence the Tender Offer, Chesapeake prepared the Press Release, which summarizes the terms of the Tender Offer, and placed the Summary Advertisement in the national edition of The Wall Street Journal for immediate publication in the next issue. These steps were completed and the Tender Offer and Consent Solicitation process set in motion at 3:00 p.m. yesterday. Later that evening, Shorewood disclosed that the Director Defendants had amended the Bylaws to adopt the draconian Bylaw Amendments, which are designed to purposefully interfere with the ability of Shorewood's stockholders to exercise their franchise rights in the Consent Solicitation. Shorewood admitted in its disclosure document that the Director Defendants adopted the Bylaw Amendments "as a consequence of an unsolicited proposal" that Shorewood had received-- namely the Chesapeake Proposal. 36. All of the Bylaw Amendments are directed specifically at the stockholder franchise in a blatant and undisguised attempt to eliminate the right of the Shorewood's stockholders to control the destiny of their company. For example, under Shorewood's previous bylaws (the "Old Bylaws"), stockholders of the Company "owning 20% of the shares of the Corporation then entitled to vote" could call a special meeting. The Bylaw Amendments purport to eliminate this right and authorize only the Shorewood Board to call a special meeting. 37. In an even clearer attempt at entrenchment, the Director Defendants purported in the Bylaw Amendments to eliminate the ability of the stockholders to remove directors without cause. Article II, Section 3 of the Old Bylaws expressly provided that "directors may be removed with or without cause." The Bylaw Amendments ostensibly amend Article II, Section 3 of the Old Bylaws to provide that directors only may be removed in accordance "with Delaware General Corporation Law Section 141(k)(1)." Section 141(k)(1) provides that where a corporation has a staggered board of directors, stockholders only may remove directors for cause. The new Article II, Section 3 thus attempts to protect the Director Defendants by eliminating the stockholders' ability to remove them except for 6

cause (the "For Cause Removal Bylaw"). Yet rather than taking this action openly, the Director Defendants tried to hide this change from Shorewood's stockholders by couching it in a technical reference to the Delaware General Corporation Law. 38. Most egregiously, the Director Defendants enacted a series of amendments that attempt to eliminate as a practical matter the right of Shorewood's stockholders to act by written consent. Section 228 of the Delaware

cause (the "For Cause Removal Bylaw"). Yet rather than taking this action openly, the Director Defendants tried to hide this change from Shorewood's stockholders by couching it in a technical reference to the Delaware General Corporation Law. 38. Most egregiously, the Director Defendants enacted a series of amendments that attempt to eliminate as a practical matter the right of Shorewood's stockholders to act by written consent. Section 228 of the Delaware General Corporation Law provides that Unless otherwise provided in the certificate of incorporation, any action required by this chapter to be taken at any annual or special meeting of such stockholders of a corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the corporation by delivery to its registered office in the [State of Delaware].
8 Del. C. (S) 228(a). 39. Shorewood's Charter does not limit or eliminate the power of Shorewood's stockholders to act by written consent. To the contrary, the Charter confirms that the Shorewood Board may not take actions designed to interfere with the stockholder franchise. Article NINTH of the Charter states:

The power to make, alter, or repeal a By-Law, and to adopt a new By- Law, except a By-Law classifying directors for election for staggard [sic.] terms, shall be vested in the Board of Directors; provided, however, that the power conferred upon the Board of Directors pursuant to this Article shall not divest or limit the power of the stockholders to adopt, amend or repeal Bylaws. (Emphasis added). Shorewood's Charter thus strongly affirms the franchise rights of Shorewood's stockholders. 40. Like the Charter, the Old Bylaws placed no limitation on the ability of Shorewood's stockholders to act by written consent. Article IX, Section 1 of the Old Bylaws provided that Unless otherwise provided in the Certificate of Incorporation or by law, any action required to be taken or which may be taken at any annual or special meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares of stock entitled to vote thereon were present and voted. Shorewood's Old Bylaws also did not contain any provisions purporting to allow the Board to set a record date for a consent solicitation, thereby permitting Shorewood's stockholders to set the record date for action by consent by delivering a consent to the Company. 41. In the Bylaw Amendments, the Director Defendants adopted a series of provisions aimed directly at the consent process. First, the Director Defendants adopted a provision purporting to require any stockholder seeking to have the stockholders authorize or take corporate action by written consent to "request the Board of Directors to fix a record date" (the "Consent Record Date Bylaw"). As publicly disclosed, the Consent Record Date Bylaw contains no provision permitting a stockholder to set the record date absent action by the Board. The Director Defendants thus attempted to arrogate to themselves exclusive authority over the setting of a record date for any consent solicitation. This is 7

contrary to Section 213(b) of the Delaware General Corporation Law, which permits a stockholder to establish a record date for a consent solicitation in the absence of action by the board of directors by delivering a signed written consent setting forth the action taken or proposed to be taken to the corporation. At the same time, the

contrary to Section 213(b) of the Delaware General Corporation Law, which permits a stockholder to establish a record date for a consent solicitation in the absence of action by the board of directors by delivering a signed written consent setting forth the action taken or proposed to be taken to the corporation. At the same time, the Director Defendants adopted a new Article IX, Section 1, which purports to impose requirements on the form of consents and to enlarge the circumstances under which consents can be revoked. Neither provision nor anything similar to them existed under the Old Bylaws. 42. Finally, the Director Defendants adopted the Super-Majority Bylaw. It provides: In furtherance and not in limitation of the powers conferred by statute, the Board of Directors of the Corporation from time to time may make, amend, alter or repeal the by-laws of the Corporation. In addition, the by-laws may be amended, added to, altered or repealed, or new by-laws may be adopted, at any meeting of stockholders of the Corporation at which a quorum is present by the affirmative vote of the holders of not less than two thirds ( 2/3) of the stock issued and outstanding as of the record date for stockholders entitled to vote at such meeting. The Super-Majority Bylaw thus requires the affirmative vote of the holders of two thirds of the Company's outstanding stock. By contrast, under the Old Bylaws, a majority of the Company's stockholders--which for action at a stockholder meeting meant only a majority of a quorum--had the power to amend the Bylaws. By enacting the Super-Majority Bylaw, the Director Defendants thus attempted doubly to disenfranchise the Company's stockholders, first by raising the vote required to a two-thirds majority, and second by raising the universe for calculating the number of stockholders to all of the outstanding shares. 43. The Super-Majority Bylaw is a blatant attempt to change the rules of the stockholder voting process in midstream and deprive the stockholders of rights that they enjoyed and to which they are entitled under the corporate contract. The Super-Majority Bylaw also is a grossly disproportionate response to the minimal threat, if any, posed by the Chesapeake Proposal and Consent Solicitation. By enacting the Super-Majority Bylaw, the Director Defendants are attempting to coerce Shorewood's stockholders into inaction by creating the impression that their votes will be futile. Indeed, the Director Defendants no doubt believe that the Super-Majority Bylaw will prevent Shorewood's stockholders as a practical matter from ever amending the Bylaws. As a group, the Company's directors and senior officers own 25.09% of Shorewood's common stock. Any stockholder proposal to make, amend, alter or repeal the Bylaws that is opposed by Shorewood's officers and directors therefore must obtain the affirmative vote of 89% of the holders of the remaining shares of the Company's outstanding stock! The Super-Majority Bylaw thus in practice imposes an 89% super-majority requirement. This makes success in any proxy or consent solicitation realistically unattainable for any group of stockholders that is opposed by Shorewood's officers and directors. The Super-Majority Bylaw therefore is a preclusive and draconian defense. The Effect Of The Bylaw Amendments On The Consent Solicitation 44. By adopting the Bylaw Amendments, the Director Defendants have attempted to interfere purposefully with the stockholder franchise and frustrate the Consent Solicitation. Without any possible motivation except entrenchment, the Director Defendants have attempted to change the rules for stockholder voting by raising the required vote to a two thirds super-majority, which as a practical matter requires a realistically unattainable 89% super-majority vote. 45. The Bylaw Amendments also represent a wholly-disproportionate and draconian response by the Director Defendants to a threat that is not legally cognizable. Faced with a potential consent 8

solicitation in which they could be voted out of office, the Director Defendants attempted to coerce Shorewood's stockholders into inaction and to preclude any chance of a successful solicitation. Moreover, in their rush to protect themselves, the Director Defendants adopted provisions that are illegal and invalid under the Shorewood Charter and Delaware law. 46. Viewed as a whole, the actions taken by the Director Defendants confirm their twin goals of interfering with the stockholder franchise and entrenching themselves. All of the Bylaw Amendments attempt to limit or eliminate stockholder voting rights. The Director Defendants specifically have targeted the consent process by adopting the

solicitation in which they could be voted out of office, the Director Defendants attempted to coerce Shorewood's stockholders into inaction and to preclude any chance of a successful solicitation. Moreover, in their rush to protect themselves, the Director Defendants adopted provisions that are illegal and invalid under the Shorewood Charter and Delaware law. 46. Viewed as a whole, the actions taken by the Director Defendants confirm their twin goals of interfering with the stockholder franchise and entrenching themselves. All of the Bylaw Amendments attempt to limit or eliminate stockholder voting rights. The Director Defendants specifically have targeted the consent process by adopting the Consent Record Date Bylaw, which allows the Director Defendants to manipulate the consent process to their own advantage. The For Cause Removal Bylaw demonstrates clearly that the sole goal of the Director Defendants is to insulate themselves and protect their positions. 47. Chesapeake believes that Shorewood's stockholders will deliver written consents to Chesapeake sufficient under the Old Bylaws to (i) amend Shorewood's Bylaws to remove the provision establishing a staggered board of directors, (ii) remove the Director Defendants, (iii) reduce the authorized number of Shorewood directors to three, (iv) elect the Nominees and (v) repeal any recent or subsequent amendments to the Bylaws. The Super-Majority Bylaw is frustrating and will frustrate the ability of Shorewood's stockholders to exercise their franchise rights and act by consent to amend the Bylaws--the prerequisite for all the actions to be taken in the Consent Solicitation--by imposing a two thirds super-majority requirement, which as a practical matter requires a realistically unattainable 89% super-majority vote. The Super-Majority Bylaw is a disproportionate and draconian response to the Consent Solicitation and the non-coercive, non-discriminatory, premium Tender Offer. The Super-Majority Bylaw instead is an entrenchment device that interferes purposefully with the stockholder franchise without any justification. Moreover, the Super-Majority Bylaw is contrary to Article Ninth of the Charter and Delaware law. IRREPARABLE HARM 48. The Director Defendants' refusal to consider the Chesapeake Proposal is preventing Shorewood's stockholders from receiving the benefits of a plainly superior transaction. The Shorewood stockholders cannot rely on the Shorewood Board to act in their best interests regarding the Chesapeake Proposal because the Director Defendants have demonstrated that their primary goal is entrenchment. 49. Until the Director Defendants enacted the Bylaw Amendments, Shorewood's stockholders had the unfettered right under Delaware law, the Charter and the Old Bylaws to act by written consent to amend the Bylaws, remove the staggered board provision, remove the Director Defendants and elect the independent Nominees, who will fulfill their fiduciary duties to Shorewood's stockholders and consider, subject to their fiduciary duties, the Chesapeake Proposal. Now, Shorewood's stockholders will be frustrated in their efforts to utilize the consent process by the Super-Majority Bylaw, which makes success in a consent solicitation realistically unattainable because as a practical matter it imposes an 89% super-majority requirement. Moreover, even if under some circumstances a consent solicitation could poll in excess of 90% of a corporation's outstanding voting power, here the Super-Majority Bylaw will chill the Consent Solicitation by making Shorewood's stockholders believe that their votes are meaningless. This type of interference with the stockholder franchise constitutes irreparable harm. In addition, because Shorewood's stockholders now have no way to bypass the Director Defendants, Shorewood's stockholders cannot receive the benefits of the Chesapeake Proposal. This also constitutes irreparable harm. 50. At the same time, Chesapeake is suffering irreparable harm as a result of the Bylaw Amendments and the inability of Shorewood's stockholders to receive the Chesapeake Proposal. The 9

chance to acquire Shorewood represents a unique opportunity, and the loss of this opportunity constitutes irreparable harm. 51. Unless the Super-Majority Bylaw is enjoined or invalidated by this Court, the substantial benefits of the Chesapeake Proposal will be forever lost. The injury to Chesapeake and Shorewood's stockholders will not be compensable in money damages, and Chesapeake has no adequate remedy at law. The proper remedy is to

chance to acquire Shorewood represents a unique opportunity, and the loss of this opportunity constitutes irreparable harm. 51. Unless the Super-Majority Bylaw is enjoined or invalidated by this Court, the substantial benefits of the Chesapeake Proposal will be forever lost. The injury to Chesapeake and Shorewood's stockholders will not be compensable in money damages, and Chesapeake has no adequate remedy at law. The proper remedy is to enjoin and invalidate the Super-Majority Bylaw and the Bylaw Amendments as a whole to permit the Consent Solicitation to go forward and the stockholders to exercise their franchise rights in a free and uncoerced environment. COUNT I (Breach of Fiduciary Duty: The Bylaw Amendments) 52. Plaintiffs repeat and reallege each and every allegation set forth in the preceding paragraphs as if fully set forth herein. 53. The Director Defendants owe Shorewood's stockholders the highest duties of care, loyalty and good faith. 54. The Director Defendants adopted the Bylaw Amendments as a defensive response to the Chesapeake Proposal and in anticipation of the Consent Solicitation. In adopting the Bylaw Amendments, the Director Defendants acted in haste, without full information and for purposes of entrenchment. 55. As such, the actions of the Director Defendants are in breach of the fiduciary duties the Director Defendants owe to Shorewood's stockholders under applicable Delaware law, including the duties of loyalty and care. 56. Plaintiffs have no adequate remedy at law. COUNT II (Breach of Fiduciary Duty: The Super-Majority Bylaw and the Consent Record Date Bylaw) 57. Plaintiffs repeat and reallege each and every allegation set forth in the preceding paragraphs as if fully set forth herein. 58. The Director Defendants owe Shorewood's stockholders the highest duties of care, loyalty and good faith. 59. The Director Defendants adopted the Super-Majority Bylaw and the Consent Record Date Bylaw as a defensive response to the Chesapeake Proposal and in anticipation of the Consent Solicitation. In responding to the Chesapeake Proposal and in anticipation of the Consent Solicitation, the Director Defendants failed to respond to a legally cognizable threat in good faith after due investigation. 60. The Super-Majority Bylaw is an unreasonable, coercive and preclusive defensive response. The SuperMajority Bylaw is unreasonable because it is a dramatically disproportionate response to the minimal threat, if any, posed by the Chesapeake Proposal and Consent Solicitation. The Super-Majority Bylaw is coercive because it chills Shorewood's stockholders into voting in favor of the 10

Director Defendants or not voting at all because the stockholders will believe their votes to be meaningless. The Super-Majority Bylaw is preclusive because as a practical matter it imposes a realistically unattainable 89% super- majority requirement for Shorewood's stockholders to amend, alter or repeal the Bylaws. 61. The Consent Record Date Bylaw is an unreasonable, coercive and preclusive defensive response because it attempts to eliminate the right of the stockholders to set a record date and arrogate that authority exclusively to the Shorewood Board.

Director Defendants or not voting at all because the stockholders will believe their votes to be meaningless. The Super-Majority Bylaw is preclusive because as a practical matter it imposes a realistically unattainable 89% super- majority requirement for Shorewood's stockholders to amend, alter or repeal the Bylaws. 61. The Consent Record Date Bylaw is an unreasonable, coercive and preclusive defensive response because it attempts to eliminate the right of the stockholders to set a record date and arrogate that authority exclusively to the Shorewood Board. 62. As such, the actions of the Director Defendants are in breach of the fiduciary duties the Director Defendants owe to Shorewood's stockholders under applicable Delaware law. 63. Plaintiffs have no adequate remedy at law. COUNT III (Breach of Fiduciary Duty: The Super-Majority Bylaw and the Consent Record Date Bylaw) 64. Plaintiffs repeat and reallege each and every allegation set forth in the preceding paragraphs as if fully set forth herein. 65. The Director Defendants owe Shorewood's stockholders the highest duties of care, loyalty and good faith. 66. The Director Defendants adopted the Super-Majority Bylaw in response to the Chesapeake Proposal and in anticipation of the Consent Solicitation. By adopting the Super-Majority Bylaw and the Consent Record Date Bylaw, the Defendant Directors purposely interfered with the stockholder franchise. 67. The Director Defendants have not and cannot offer any justification for adopting the Super-Majority Bylaw and the Consent Record Date Bylaw. 68. As such, the actions of the Director Defendants are in breach of the fiduciary duties the Director Defendants owe to Shorewood's stockholders under applicable Delaware law. 69. Plaintiffs have no adequate remedy at law. COUNT IV (Ultra Vires: The Super-Majority Bylaw and the Consent Record Date Bylaw) 70. Plaintiffs repeat and reallege each and every allegation set forth in the preceding paragraphs as if fully set forth herein. 71. Section 109(a) of the Delaware General Corporation Law provides that directors "shall not divest the stockholders...... of the power, nor limit their power to adopt, amend or repeal bylaws." The Super-Majority Bylaw violates this provision and is void. 72. Section 102(b)(4) of the Delaware General Corporation Law provides that super-majority provisions may be placed in the certificate of incorporation. There is no similar authorization for super11

majority provisions in a corporation's bylaws. The Super-Majority Bylaw attempts to circumvent this statutory scheme and is void. 73. Article NINTH of the Charter provides that the Shorewood Board "shall not divest or limit the power of the stockholders to adopt, amend or repeal Bylaws." The Super-Majority Bylaw violates this provision and is void.

majority provisions in a corporation's bylaws. The Super-Majority Bylaw attempts to circumvent this statutory scheme and is void. 73. Article NINTH of the Charter provides that the Shorewood Board "shall not divest or limit the power of the stockholders to adopt, amend or repeal Bylaws." The Super-Majority Bylaw violates this provision and is void. 74. Section 213(b) of the Delaware General Corporation Law permits a stockholder to establish a record date for a consent solicitation in the absence of action by the board of directors by delivering a signed written consent setting forth the action taken or proposed to be taken to the corporation. As publicly disclosed, the Consent Record Date Bylaw purports to eliminate this right and is void. 75. Plaintiffs have no adequate remedy at law. COUNT V (Breach of Fiduciary Duty: The Rights Plan) 76. Plaintiffs repeat and reallege each and every allegation set forth in the preceding paragraphs as if fully set forth herein. 77. The Director Defendants owe Shorewood's stockholders the highest duties of care, loyalty and good faith. 78. In light of the superior value offered to Shorewood stockholders by the Proposed Acquisition, there is no legitimate reason for the Director Defendants to retain the Rights Plan. The Director Defendants' failure to redeem the rights or to render the Rights Plan inapplicable to the Proposed Acquisition deprives Shorewood's stockholders of the right to maximize their wealth by selling their Shorewood shares at the premium price offered by the Proposed Acquisition. 79. The Director Defendants' failure to redeem the rights or to render the Rights Plan inapplicable to the Proposed Acquisition has no economic justification, serves no legitimate purpose, and is not a reasonable response to the Tender Offer and/or the Proposed Merger, which pose no threat to the interests of Shorewood's stockholders or to Shorewood's corporate policy and effectiveness. As such, the actions of the Director Defendants are in breach of the fiduciary duties the Director Defendants owe to Shorewood's stockholders under applicable Delaware law. 80. Plaintiffs have no adequate remedy at law. COUNT VI (Breach of Fiduciary Duty: Section 203) 81. Plaintiffs repeat and reallege each and every allegation set forth in the preceding paragraphs as if fully set forth herein. 82. The Director Defendants owe Shorewood's stockholders the highest duties of care, loyalty and good faith. 83. The Director Defendants are empowered by Section 203 to render the statute inapplicable to the Proposed Acquisition by approving the Tender Offer. 12

84. In light of the superior value offered to Shorewood stockholders by the Proposed Acquisition, there is no legitimate reason for the Director Defendants to fail to approve the Tender Offer or to fail to take any other steps necessary to render Section 203 inapplicable to the Proposed Acquisition. Such failures only have the effect of withholding from Shorewood's stockholders the right to maximize their wealth by selling their Shorewood shares at the premium price offered by the Proposed Acquisition.

84. In light of the superior value offered to Shorewood stockholders by the Proposed Acquisition, there is no legitimate reason for the Director Defendants to fail to approve the Tender Offer or to fail to take any other steps necessary to render Section 203 inapplicable to the Proposed Acquisition. Such failures only have the effect of withholding from Shorewood's stockholders the right to maximize their wealth by selling their Shorewood shares at the premium price offered by the Proposed Acquisition. 85. The Director Defendants' failure to approve the Tender Offer or otherwise render Section 203 inapplicable to the Proposed Acquisition has no economic justification, serves no legitimate purpose, and is not a reasonable response to the Proposed Acquisition, which poses no threat to the interests of Shorewood's stockholders or to Shorewood's corporate policy and effectiveness. As such, the actions of the Director Defendants are in breach of the fiduciary duties the Director Defendants owe to Shorewood's stockholders under applicable Delaware law. 86. Plaintiffs have no adequate remedy at law. COUNT VII (Declaratory And Injunctive Relief: Additional Anti-Takeover Devices) 87. Plaintiffs repeat and reallege each and every allegation set forth in the preceding paragraphs as if fully set forth herein. 88. The Director Defendants owe Shorewood's stockholders the highest duties of care, loyalty and good faith. 89. The Tender Offer is non-coercive and non-discriminatory, it is fair to Shorewood's stockholders, it poses no threat to Shorewood's corporate policy and effectiveness, and it represents a substantial premium over the market price of Shorewood common stock prior to the public announcement of the Tender Offer. 90. Adoption of any additional defensive measures against the Tender Offer, the Proposed Merger, the Consent Solicitation or proposed acquisition, or the adoption of any additional measure that would prevent a future board of directors from exercising its fiduciary duties, including, but not limited to, amendments to the Rights Plan, amendments to the Bylaws, pursuit of alternative transactions with substantial break-up fees and/or lock-ups, "White Knight" stock issuances, changes to licensing agreements, or executive compensation arrangements with substantial payments triggered by a change in control, would itself be a breach of the Director Defendants' fiduciary duties to Shorewood's stockholders. 91. Plaintiffs have no adequate remedy at law. COUNT VIII (Declaratory And Injunctive Relief: The Consent Solicitation) 92. Plaintiffs repeat and reallege each and every allegation set forth in the preceding paragraphs as if fully set forth herein. 93. The Director Defendants owe Shorewood's stockholders the highest duties of care, loyalty and good faith. 13

94. The Consent Solicitation complies and will comply with the Delaware law, the Charter and the Old Bylaws. 95. Plaintiffs are entitled to a declaration that Consent Solicitation complies and will comply with the Delaware law, the Charter and the Old Bylaws. 96. Plaintiffs have no adequate remedy at law. WHEREFORE, Plaintiffs respectfully request that this Court enter an Order

94. The Consent Solicitation complies and will comply with the Delaware law, the Charter and the Old Bylaws. 95. Plaintiffs are entitled to a declaration that Consent Solicitation complies and will comply with the Delaware law, the Charter and the Old Bylaws. 96. Plaintiffs have no adequate remedy at law. WHEREFORE, Plaintiffs respectfully request that this Court enter an Order a. declaring that the Director Defendants have breached their fiduciary obligations to Shorewood stockholders under Delaware law by adopting the Super- Majority Bylaw, the Consent Record Date Bylaw, and the Bylaw Amendments as a whole; b. declaring that the Super-Majority Bylaw and the Consent Record Date Bylaw are ultra vires and void; c. enjoining Shorewood, its directors, officers, employees and agents from relying on, implementing, applying or enforcing the Super-Majority Bylaw, the Consent Record Date Bylaw, and the Bylaw Amendments as a whole; d. declaring that the Director Defendants have breached their fiduciary obligations to Shorewood stockholders under Delaware law by failing to redeem the Rights in response to the Tender Offer; e. compelling Shorewood and the Director Defendants to redeem the rights or to render the Rights Plan inapplicable to the Proposed Acquisition; f. declaring that the Director Defendants have breached their fiduciary obligations to Shorewood stockholders under Delaware law by failing to render Section 203 inapplicable to the Proposed Acquisition; g. compelling the Director Defendants to approve the Proposed Acquisition for purposes of Section 203 and enjoin them from taking any action to enforce or apply Section 203 that would impede, thwart, frustrate or interfere with the Proposed Acquisition; h. temporarily, preliminarily and permanently enjoining Shorewood, its employees, agents and all persons acting on its behalf or in concert with it from taking any action with respect to the Rights Plan, except to redeem the rights or render the Rights Plan inapplicable to the Tender Offer, and from adopting any other Rights Plan or other measures, or taking any other action designed to impede, or which has the effect of impeding, the Tender Offer or the efforts of Chesapeake to acquire control of Shorewood; i. temporarily, preliminarily and permanently enjoin Defendants, their affiliates, subsidiaries, officers, directors and all others acting in concert with them or on their behalf from bringing any action concerning the Rights Plan, Section 203, any other defensive measure, the Tender Offer, the Proposed Merger, the Consent Solicitation and the Proposed Acquisition in any other court; j. declaring that the adoption of any other measure that has the effect of impeding, thwarting, frustrating or interfering with the Tender Offer, the Proposed Merger, the Consent Solicitation and the Proposed Acquisition constitutes a breach of the Director Defendants' fiduciary duties; k. enjoining Shorewood and the Director Defendants from adopting any other measure that has the effect of impeding, thwarting, frustrating or interfering with the Tender Offer, the Proposed Merger, the Consent Solicitation and the Proposed Acquisition; 14

l. enjoining Shorewood and the Director Defendants from taking any other action to delay, impede, postpone or thwart the voting or other rights of Shorewood's stockholders in connection with the Consent Solicitation or otherwise;

l. enjoining Shorewood and the Director Defendants from taking any other action to delay, impede, postpone or thwart the voting or other rights of Shorewood's stockholders in connection with the Consent Solicitation or otherwise; m. compelling Shorewood and the Director Defendants to recognize the ability of Shorewood's stockholders to act by written consent in the Consent Solicitation; n. awarding Plaintiffs their costs and disbursements in this action, including reasonable attorneys' and experts' fees; and o. granting plaintiffs such other and further relief as this Court may deem just and proper.
/s/ R. Franklin Balotti _____________________________________ R. Franklin Balotti J. Travis Laster Richards, Layton & Finger One Rodney Square P.O. Box 551 Wilmington, Delaware 19899 (302) 658-6541 Attorneys for Plaintiffs Dated: December 3, 1999

15

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE CHESAPEAKE CORPORATION and SHEFFIELD, INC., Plaintiffs, v. No. SHOREWOOD PACKAGING CORPORATION, Defendant. COMPLAINT Plaintiffs Chesapeake Corporation ("Chesapeake") and Sheffield, Inc. ("Purchaser," jointly with Chesapeake, "Plaintiffs") file this action seeking declaratory relief in connection with (i) Plaintiffs' offer to purchase shares of defendant Shorewood Packaging Corporation's ("Shorewood") common stock, and (ii) Chesapeake's solicitation of written consents from the stockholders of Shorewood to take certain actions without a stockholder meeting. JURISDICTION AND VENUE 1. This Court has jurisdiction over this action pursuant to 15 U.S.C. (S)
78aa, 28 U.S.C. (S) 1331(a) and 28 U.S.C. (S) 1337(a). 2. Venue in this Court is proper pursuant to 15 U.S.C. (S) 78aa and 28

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE CHESAPEAKE CORPORATION and SHEFFIELD, INC., Plaintiffs, v. No. SHOREWOOD PACKAGING CORPORATION, Defendant. COMPLAINT Plaintiffs Chesapeake Corporation ("Chesapeake") and Sheffield, Inc. ("Purchaser," jointly with Chesapeake, "Plaintiffs") file this action seeking declaratory relief in connection with (i) Plaintiffs' offer to purchase shares of defendant Shorewood Packaging Corporation's ("Shorewood") common stock, and (ii) Chesapeake's solicitation of written consents from the stockholders of Shorewood to take certain actions without a stockholder meeting. JURISDICTION AND VENUE 1. This Court has jurisdiction over this action pursuant to 15 U.S.C. (S)
78aa, 28 U.S.C. (S) 1331(a) and 28 U.S.C. (S) 1337(a). 2. Venue in this Court is proper pursuant to 15 U.S.C. (S) 78aa and 28 U.S.C. (S) 1391(b). THE PARTIES

3. Plaintiff Chesapeake is a corporation incorporated under the laws of the Commonwealth of Virginia with its principal executive offices located in Richmond, Virginia. Chesapeake is primarily engaged in the manufacture and sale of specialty packaging, point-of-purchase displays, and merchandising services. Chesapeake's shares are listed on the New York Stock Exchange ("NYSE"). Chesapeake is a beneficial owner of Shorewood common stock. 4. Plaintiff Purchaser is a corporation incorporated under the laws of the State of Delaware and a wholly-owned subsidiary of Chesapeake. Purchaser was formed to acquire all of the outstanding shares of Shorewood through the tender offer and merger proposal described below. Purchaser is the record owner of 100 shares of Shorewood common stock. 5. Defendant Shorewood is a corporation incorporated under the laws of the State of Delaware with its principal executive offices located in New York, New York. Shorewood and its subsidiaries print and manufacture paperboard packaging through operations in the United States, Canada and China. 6. Shorewood's common stock is registered pursuant to Section 12(b) of the Securities Exchange Act of 1934 (the "Exchange Act"), 15 U.S.C. (S) 78l(b), and is listed and traded on the NYSE.

THE TENDER OFFER 7. Plaintiffs commenced today a fully-financed, non-coercive, non- discriminatory, all-cash, all-shares premium tender offer for Shorewood's common stock at $17.25 per share (the "Tender Offer"). Chesapeake commenced

THE TENDER OFFER 7. Plaintiffs commenced today a fully-financed, non-coercive, non- discriminatory, all-cash, all-shares premium tender offer for Shorewood's common stock at $17.25 per share (the "Tender Offer"). Chesapeake commenced the Tender Offer by issuing a press release summarizing the terms of the Tender Offer (the "Press Release") and publishing a summary advertisement of the Tender Offer in the national edition of The Wall Street Journal (the "Summary Advertisement"). 8. Shorewood stockholders whose shares are purchased by Purchaser in the Tender Offer will receive $17.25 per share in cash. The $17.25 in cash offered in the Tender Offer represents approximately a 45% premium over the closing price of Shorewood's common stock on November 9, 1999, the last full trading day before Chesapeake made a confidential proposal to acquire Shorewood in a negotiated transaction at $16.50 per share. The $17.25 in cash offered in the Tender Offer represents more than a 28% premium above the closing price of Shorewood's stock on November 17, 1999, the last full trading day before Shorewood disclosed to the markets Chesapeake's confidential proposal. The Tender Offer is conditioned upon, among other things, (i) the tender and purchase of sufficient Shorewood shares to give Plaintiffs a majority of the outstanding Shorewood shares on a fully diluted basis, (ii) the exemption of the Tender Offer from Section 203 of the Delaware General Corporation Law ("Section 203"), and (iii) the redemption or inapplicability of Shorewood's stockholder rights plan (the "Rights Plan"). 9. The Tender Offer is the initial step in a two-step transaction pursuant to which Chesapeake proposes to acquire all of the outstanding shares of Shorewood stock. If successful, Chesapeake intends to follow the Tender Offer with a merger or similar business combination with Purchaser or a direct or indirect subsidiary of Chesapeake (the "Proposed Merger," and together with the Tender Offer, the "Proposed Acquisition"). Pursuant to the Proposed Merger, it is currently anticipated that each then outstanding share of Shorewood (other than shares owned by Chesapeake or any of its subsidiaries or shares held in the treasury of Shorewood) would be converted into the right to receive an amount in cash equal to the price paid in the Tender Offer. 10. The Tender Offer is, and will continue to be, in full compliance with all applicable federal laws and regulations governing tender offers, i.e., the provisions of the Williams Act, embodied in Sections 14(d) and 14(e) of the Exchange Act, 15 U.S.C. (S)(S) 78n(d) and (e), and the rules and regulations promulgated thereunder by the Securities and Exchange Commission ("SEC"). In accordance with the Exchange Act and the rules and regulations promulgated thereunder by the SEC, Plaintiffs commenced the Tender Offer by issuing the Press Release and publishing the Summary Advertisement. In connection with the Tender Offer and in accordance with the Exchange Act and the rules and regulations promulgated thereunder by the SEC, Plaintiffs will file promptly, and in any event within five business days, a Schedule 14D-1 with the SEC (the "Schedule 14D-1") pursuant to Section 14(d)(1) of the Exchange Act and Rule
14d-3 promulgated thereunder, 17 C.F.R. (S) 240.14d-3. 11. Section 14(d) of the Exchange Act, 15 U.S.C. (S) 78n(d), and the rules and regulations promulgated thereunder by the SEC, require that any person or entity making a tender offer for beneficial ownership of more than five percent of a class of registered equity securities file and disclose certain specified information with respect to the tender offer. Any such bidder must disclose, among other things, its identity and background, past contacts, transactions or negotiations between the bidder and the company in whom the bidder seeks to acquire stock, the source and amount of funds needed for the tender offer, and any plans the bidder may have to change the capitalization, corporate structure or business of the company whose stock it seeks to acquire.

12. In addition, Section 14(e) of the Exchange Act, 15 U.S.C. (S) 78n(e), makes it "unlawful for any person to make any untrue statement of a material fact or omit to state any material fact necessary in order to make the statement made, in light of the circumstances under which they are made, not 2

misleading, or to engage in any fraudulent, deceptive, or manipulative acts or practice in connection with any tender offer." Plaintiffs have complied fully with the Exchange Act and all rules and regulations promulgated thereunder. 13. In connection with the Tender Offer, Plaintiffs will disseminate to Shorewood's stockholders an offer to purchase containing all material information required by applicable law to be disclosed (the "Offer to Purchase"). THE CONSENT SOLICITATION 14. In furtherance of the Proposed Acquisition, Chesapeake publicly disclosed in the Press Release its intention to solicit written consents from Shorewood's stockholders to take certain actions without a stockholder meeting (the "Consent Solicitation"). The purpose of the Consent Solicitation is to obtain sufficient consents from Shorewood's stockholders in order to (i) amend Shorewood's bylaws to remove the provision establishing a staggered board of directors, (ii) remove all current members of the Shorewood Board, (iii) reduce the authorized number of Shorewood directors to three, (iv) elect to the Shorewood Board three individuals nominated by Chesapeake (the "Nominees"), and (v) repeal any recent or subsequent amendments to the Shorewood Amended and Restated By-laws (the "Bylaws"). If elected, the Nominees will consider, subject to their fiduciary duties, (i) redeeming the Rights Plan (or amending the Rights Plan to make it inapplicable to the Proposed Acquisition), (ii) approving the Tender Offer under Section 203, and (iii) taking such other actions as may be required to expedite the prompt consummation of the Proposed Acquisition. 15. Section 14(a) of the Exchange Act, 15 U.S.C. (S) 78n(a), and the rules and regulations promulgated thereunder by the SEC, require that a person soliciting an authorization with respect to any registered security file and disclose certain specific information with respect to the solicitation. Any such solicitor must disclose, among other things, its identity, the date, time and place when the proposed action will be taken, and any substantial interest of the solicitor in the matters to be acted upon. In addition, Rule 14a-9, 17 C.F.R. (S) 240.14a-9, promulgated by the SEC under Section 14(a) of the Exchange Act, provides that "[n]o solicitation subject to this regulation shall be made........ containing any statement of which, at the time and in the light of the circumstances under which it is made, is false or misleading with respect to any material fact, or which omits to state any material fact necessary in order to make the statements therein not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of a proxy for the same meeting or subject matter which has become false or misleading.'' 16. Chesapeake' preliminary materials relating to the Consent Solicitation will be filed promptly with the SEC (the "Consent Solicitation Materials"). Chesapeake believes the Consent Solicitation Materials are in full compliance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder by the SEC, including Rule 14a-9. Chesapeake will disseminate to Shorewood's stockholders the Consent Solicitation Materials disclosing all material information required by applicable law. 17. In furtherance of the Consent Solicitation, Purchaser is demanding that Shorewood produce a list of its stockholders and related stocklist materials. DECLARATORY RELIEF 18. The Declaratory Judgment Act, 28 U.S.C. (S) 2201, provides that "[i]n a case of actual controversy within its jurisdiction, . . . any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such 3

declaration." Plaintiffs are entitled to a declaratory judgment that the Schedule 14D-1 and all exhibits thereto and the Consent Solicitation Materials are proper and in compliance with all applicable securities laws, rules and regulations. 19. Although the Tender Offer, Proposed Merger and Proposed Acquisition are fairly and attractively priced, Plaintiffs reasonably expect that Shorewood will attempt to thwart or delay Plaintiffs' lawful efforts to

declaration." Plaintiffs are entitled to a declaratory judgment that the Schedule 14D-1 and all exhibits thereto and the Consent Solicitation Materials are proper and in compliance with all applicable securities laws, rules and regulations. 19. Although the Tender Offer, Proposed Merger and Proposed Acquisition are fairly and attractively priced, Plaintiffs reasonably expect that Shorewood will attempt to thwart or delay Plaintiffs' lawful efforts to consummate the Tender Offer and pursue the Consent Solicitation. Plaintiffs believe Shorewood will seek to delay and defeat the Tender Offer and Consent Solicitation through efforts including the filing of a meritless suit claiming that public disclosures and filings made by Plaintiffs in conjunction with the Tender Offer and the Consent Solicitation violate applicable federal securities laws and regulations. Thus, there is a substantial controversy between parties having adverse interests which is of sufficient immediacy and reality to warrant the issuance of a declaratory judgment. 20. In the absence of declaratory relief, Plaintiffs will suffer irreparable harm. As evidenced by the course of action that Shorewood has pursued to date and the actions taken generally by companies that receive unsolicited acquisition proposals, Shorewood will likely defend against the Proposed Acquisition and the Consent Solicitation by, among other things, filing false claims designed to delay or defeat the Proposed Acquisition and the Consent Solicitation. A declaratory judgment that the disclosures in the Schedule 14D- 1, the Offer to Purchase and the Consent Solicitation Materials comply with all applicable federal laws will serve the purpose of adjudicating the interests of the parties, resolving any complaints concerning the propriety of the Tender Offer or the Consent Solicitation under federal law and permitting an otherwise lawful transaction to proceed. 21. Plaintiffs therefore request pursuant to the Declaratory Judgment Act, 28 U.S.C. (S)(S) 2201 and 2202, that this Court enter a declaratory judgment that the public disclosures and documents filed with the SEC by plaintiffs and which are being disseminated to Shorewood stockholders in connection with the Tender Offer and the Consent Solicitation comply fully with all applicable provisions of law. WHEREFORE, Plaintiffs respectfully request that this Court: a. declare that Plaintiffs have disclosed all information required by, and are otherwise in all respects in compliance with, all applicable laws and other obligations, including, without limitation, Sections 14(a), 14(d) and 14(e) of the Exchange Act and any other federal securities laws, rules or regulations deemed or claimed to be applicable to the Schedule 14D-1, the Tender Offer, the Consent Solicitation or the Consent Solicitation Materials; b. award plaintiffs their costs and disbursements in this action, including reasonable attorneys' fees; and c. grant plaintiffs such other and further relief as this Court may deem just and proper.
/s/ R. Franklin Balotti _____________________________________ R. Franklin Balotti J. Travis Laster Richards, Layton & Finger One Rodney Square P.O. Box 551 Wilmington, Delaware 19899 (302) 658-6541 Attorneys for Plaintiffs Dated: December 3, 1999

4


								
To top