csk10q20082qex101.htm


    Exhibit 10.1

     

     

    
      	
              
                VIRGINIA:
      IN THE CIRCUIT COURT OF

                HENRICO
      COUNTY

                 

                4301
      E. Parham Road

                Richmond,
      Virginia 23228

                 

              

               

              Plaintiff:  PHILIP
      MORRIS USA INC.

               

              6601
      West Broad Street,

              Richmond,
      Virginia 23230

               

              v.

              
                 

                Defendants:  CHESAPEAKE
      CORPORATION and

                WTM
      I COMPANY

                 

                1021
      East Cary Street

                James
      Center II, 22nd
      Floor

                Richmond,
      Virginia 23219

                 

              

               

               

            	
               

               

               

               

               

               

               

               

               

              
                � Court
      Use Only �

                 

              

               

              Case
      Number:

               

               

               

               

               

               

               

               

               

               

              Division:            Courtroom:

            
	
              ORDER
      AND CONSENT DECREE

            


    

    


    Background

    


    A. Plaintiff
Philip Morris USA Inc. (“PM USA”) filed this action against Defendants
Chesapeake Corporation (“Chesapeake”) and WTM I Company (“WTM I”) (each a
“Party” and collectively with PM USA, the “Parties”) seeking a declaratory
judgment that PM USA did not have an obligation to indemnify Chesapeake or WTM I
for the clean up costs associated with the Fox River.

    


    B. Chesapeake
and WTM I have asserted that PM USA is obligated to indemnify them under the
1985 Stock Purchase Agreement (“1985 Stock Purchase Agreement”) between
Chesapeake and PM USA for the purchase and sale of Wisconsin Tissue Mills, Inc.
(“WTM”).

    


    C. PM USA
does not admit any liability to Chesapeake, WTM I, or any other party arising
out of the transactions or occurrences alleged in the Complaint, nor does
Chesapeake or WTM I admit any liability to PM USA or any other party arising out
of the transactions or occurrences alleged in the Complaint.  All
Parties expressly deny that they are liable to the other.

    


    D. The
Parties recognize, and the Court by entering this Consent Decree finds, that
this Consent Decree has been negotiated by the Parties in good faith and
implementation of this Consent Decree will avoid litigation between the Parties,
and that this Consent Decree is fair, reasonable, and in the public
interest.

    


    NOW,
THEREFORE, it is hereby Ordered, Adjudged, and Decreed:

     

    1. This
Court has jurisdiction over the subject matter of this action pursuant to Va.
Code § 8.01-184.  This Court also has personal jurisdiction over the
Parties.  For the purposes of this Consent Decree, the Parties waive
all objections and defenses that they may have to jurisdiction of the Court or
to venue in this Court.  The Parties shall not challenge the terms of
this Consent Decree or this Court's jurisdiction to enter and enforce this
Consent Decree.

    


    2.  This
Consent Decree applies to and is binding upon each Party, as well as its
respective successors, predecessors, agents, subsidiaries and assigns and any
bankruptcy trustee, debtor in possession, creditors’ committee or other party
acting on its behalf.  Any change in ownership or corporate status of
a Party, including, but not limited to, any transfer of assets or real or
personal property, shall in no way alter such Party’s responsibilities under
this Consent Decree.

    


    3. PM USA
waives and releases all claims to recover past indemnification payments made to
Chesapeake or WTM I for the Fox River matter.

    


    4. PM USA
agrees to cooperate with WTM I claiming all funds available on general liability
insurance policies covering the WTM I losses for the Fox River clean
up.  Cooperation includes waiving all claims relating to or arising
from or connected with WTM I’s liabilities for the Fox River
matter.  PM USA disclaims all rights to such insurance proceeds and
agrees that all such insurance proceeds shall be paid to WTM I (subject to
Paragraph 5) up to the full amount WTM I may become obligated to pay (exclusive
of funds reimbursed by PM USA) for response costs, natural resource damages, and
consultants’ and attorneys’ fees arising from the Fox River matter.

    


    5. All
insurance proceeds recovered on behalf of WTM I for the Fox River matter
shall be used only to pay the liabilities (including, but not limited to,
response costs, natural resource damages, and consultants’ and attorneys’ fees)
of WTM I and Chesapeake arising from the Fox River clean up.  Prior to
using or obtaining any insurance proceeds, Chesapeake and WTM I agree to create
an escrow account in a form reasonably acceptable to PM USA into which all
insurance proceeds will be deposited directly from the insurance carriers to
ensure that all such proceeds are used only to pay the liabilities of WTM I
arising from the Fox River clean up.

    


    6. PM USA
will pay up to $36 million towards the liability of WTM I for all losses and
expenses incurred by or on behalf of WTM I arising from the release of PCBs into
the Fox River from WTM as and when such costs become due and have been paid by
WTM I; provided, however, that, during 2008, PM USA will only pay (i) the
outstanding statement of Chesapeake dated April 14, 2008, for legal, consulting
and expert fees, which PM USA agrees to pay on or before June 27, 2008; (ii) the
$9.5 million due July 15, 2008 under the Amended OU1 Consent Decree; and (iii)
no more than an additional $10 million, if necessary and otherwise consistent
with the terms set forth in this Consent Decree.  Each of the 2008
payments described above shall be part of and count against the $36 million that
PM USA is agreeing to pay under this Consent Decree.  The $36 million
that PM USA is agreeing to pay in this Consent Decree is in addition to the
proceeds of any insurance obtained by WTM I as described in this Consent
Decree.  Under no circumstances will PM USA’s obligations to pay
Chesapeake and/or WTM I exceed a maximum of $36 million, regardless of the
eventual or future liability of WTM I or Chesapeake for the Fox River clean
up.  Subject to the limitations described above on PM USA’s
obligations to make payments in 2008, for payments to EPA, Wisconsin Department
of Natural Resources, or escrow accounts in excess of $2 million, PM USA will
provide same day funding to WTM I or Chesapeake, provided that PM USA receives
30 days prior written notice.  PM USA acknowledges adequate notice of
the obligation to pay $9.5 million due July 15, 2008 under the Amended OU1
Consent Decree.

    


    7. All
moneys contributed by PM USA to Chesapeake or WTM I shall be used only to pay
the liabilities (including, but not limited to, response costs, natural resource
damages, and consultants’ and attorneys’ fees) of WTM I or Chesapeake arising
from the Fox River clean up.

    


    8. Except
for the obligations created by this Consent Decree, Chesapeake and WTM I, for
and on behalf of themselves, their successors, predecessors, agents,
subsidiaries and assigns and any bankruptcy trustee, debtor in possession,
creditors’ committee or other party acting on their behalf, hereby release,
remise, waive, forever discharge and surrender PM USA and all of its respective
past and present affiliates, parents, subsidiaries, predecessors, employees,
heirs, attorneys, agents, representatives, successors, and assigns, from and
against any and all past, present and future claims, causes of action, debts,
suits, liabilities, accounts, contracts, demands, attorneys’ fees, costs,
expenses, judgments, settlements and damages of whatever nature, whether direct
or indirect, known or unknown, matured or unmatured, fixed or contingent, in law
or equity, relating to, based upon or arising out of, directly or indirectly, or
in any way resulting from the 1985 Stock Purchase Agreement or the Fox River
matter, including, but not limited to, all claims for indemnification,
contribution, or cost recovery arising from the Fox River clean up or the
discharge of PCBs from WTM.

    


    9. Except
for the obligations created by this Consent Decree, PM USA, for and on behalf of
itself, its successors, predecessors, agents, subsidiaries and assigns and any
bankruptcy trustee, debtor in possession, creditors’ committee or other party
acting on their behalf, hereby release, remise, waive, forever discharge and
surrender Chesapeake and WTM I and all of their respective past and present
affiliates, parents, subsidiaries, predecessors, employees, heirs, attorneys,
agents, representatives, successors, and assigns, from and against any and all
past, present and future claims, causes of action, debts, suits, liabilities,
accounts, contracts, demands, attorneys’ fees, costs, expenses, judgments,
settlements and damages of whatever nature, whether direct or indirect, known or
unknown, matured or unmatured, fixed or contingent, in law or equity, relating
to, based upon or arising out of, directly or indirectly, or in any way
resulting from the 1985 Stock Purchase Agreement or the Fox River matter,
including, but not limited to, all claims for indemnification, contribution, or
cost recovery arising from the Fox River clean up or the discharge of PCBs from
WTM.

    


    10. WTM I
will regularly keep PM USA reasonably advised of progress on the Fox River
matter.  PM USA will treat all such information as confidential and
privileged.

    


    11. PM USA
will waive control of settlements and selection of counsel, provided that WTM I
and Chesapeake exercise good faith in controlling settlements and selection of
counsel and provide PM USA no less than 30 days written notice of any obligation
under such settlements to make payments.  WTM I and Chesapeake agree
to use reasonable efforts to negotiate and obtain appropriate releases and
protection for PM USA in any settlement agreements or consent decrees related to
the Fox River clean up.

    


    12. As long
as PM USA fulfills its obligations under this Consent Decree, Chesapeake and WTM
I, for and on behalf of themselves, their successors, predecessors, agents,
subsidiaries and assigns and any bankruptcy trustee, debtor in possession,
creditors’ committee or other party acting on their behalf, agree that they will
not assist any other party or entity in any action seeking recovery against PM
USA for any costs arising from the Fox River matter, except as required to do so
to respond to any request for discovery.

    


    13. At PM
USA’s request and expense, Chesapeake and WTM I agree to provide PM USA with
access to and copies of all documents relating to operations at WTM during the
period when it was a wholly-owned subsidiary of PM USA, as well as
non-privileged documents generated within two years thereafter.  At PM
USA’s request, Chesapeake and WTM I will provide PM USA on a priority basis
contact information for and will not object to access to current or former
employees, officers, and directors of WTM so that PM USA can interview
them.

    


    14. The
Parties recognize that irreparable injury will result from a breach of any
provision of this Consent Decree and that money damages will be inadequate to
fully remedy the injury.  Accordingly, in the event of a breach or
threatened breach of one or more of the provisions of this Consent Decree, the
Court orders and all Parties agree that any Party who may be injured by such
action or threatened action shall be entitled to one or more preliminary or
permanent orders (in addition to any other remedies which may be available to
that party) as follows:  (a) restraining and enjoining any act which
would constitute a violation of this Consent Decree; or (b) compelling the
performance of any obligation which, if not performed, would constitute a
violation of this Consent Decree.

    


    15. In
consideration of Chesapeake and WTM I entering into this Consent Decree, PM USA
hereby unconditionally and irrevocably agrees that, if an Insolvency Event
(defined below) occurs, Chesapeake and WTM I shall be entitled to, and PM USA
hereby unconditionally and irrevocably consents to the allowance or approval of,
relief from the automatic stay so as to allow Chesapeake and WTM I to exercise
their rights and remedies under this Consent Decree.  In such event,
PM USA shall not, in any manner, oppose or otherwise delay any motion filed by
Chesapeake and WTM I for relief from the automatic stay.  “Insolvency Event”
means:  (a) the commencement of a proceeding under any applicable
bankruptcy, reorganization, liquidation, insolvency, creditors’ rights or other
similar law now or hereafter in effect or a proceeding in which a receiver,
liquidator, trustee or other similar official is sought to be, or is, appointed
for PM USA; (b) any vote, action or consent by PM USA in favor of causing PM USA
to become a party to any of the foregoing proceedings set forth in clause (a)
(including, without limitation, the failure to oppose any such proceeding); or
(c) the execution of any written agreement by PM USA in furtherance of causing
PM USA to become a party to any of the foregoing proceedings set forth in clause
(a) above.

    


    16. In
consideration of PM USA entering into this Consent Decree, Chesapeake and WTM I
hereby unconditionally and irrevocably agree that, if an Insolvency Event
(defined below) occurs, PM USA shall be entitled to, and Chesapeake and WTM I
hereby unconditionally and irrevocably consent to the allowance or approval of,
relief from the automatic stay so as to allow PM USA to exercise its rights and
remedies under this Consent Decree.  In such event, Chesapeake and WTM
I shall not, in any manner, oppose or otherwise delay any motion filed by PM USA
for relief from the automatic stay.  “Insolvency Event”
means:  (a) the commencement of a proceeding under any applicable
bankruptcy, reorganization, liquidation, insolvency, creditors’ rights or other
similar law now or hereafter in effect or a proceeding in which a receiver,
liquidator, trustee or other similar official is sought to be, or is, appointed
for Chesapeake or WTM I; (b) any vote, action or consent by Chesapeake or WTM I
in favor of causing Chesapeake or WTM I to become a party to any of the
foregoing proceedings set forth in clause (a) (including, without limitation,
the failure to oppose any such proceeding); or (c) the execution of any written
agreement by Chesapeake or WTM I in furtherance of causing Chesapeake or WTM I
to become a party to any of the foregoing proceedings set forth in clause (a)
above.

    


    17. The
undersigned representatives of each Party certify that he or she is fully
authorized to enter into the terms and conditions of this Consent Decree and to
execute and legally bind such Party to this document.

    


    18. Each
Party hereby agrees to support the entry of this Consent Decree by this Court by
means of a Joint Motion and further agrees not to challenge any provision of
this Consent Decree.

    


    19. Each
Party will be responsible for its own fees and costs related to the
litigation.

    


    20. If for
any reason the Court should decline to approve this Consent Decree in the form
presented, the Parties shall meet promptly and attempt to ameliorate the Court’s
concerns.   If the Court declines to approve a subsequent Consent
Decree with agreed-upon modifications that attempt to ameliorate the Court’s
concerns, then the Parties will execute a settlement agreement substantially in
the form of this Consent Decree.

    


    21. Upon
approval and entry of this Consent Decree by the Court, the Consent Decree shall
constitute a final judgment between and among PM USA, Chesapeake, and WTM
I.  The Court finds that there is no just reason for delay and
therefore enters this judgment as a final judgment.

    


    SO
ORDERED.

    


    


    


    /s/ L. A. Harris,
Jr.______________________

    Henrico County Circuit Court
Judge

    


    


    July 1, 2008

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    THE
UNDERSIGNED PARTY enters into this Order and Consent Decree in the matter of
Philip Morris USA v.
Chesapeake Corporation and WTM I Company (Henrico County Va. No.
______).

     

    


    


    


     

    FOR
PHILIP MORRIS USA INC.

     

    
    

     

    
      	 June 26, 2008	 Signature:	 /s/ Craig A.
      Johnson
	 Date	 Name
      (print):	 Craig A.
      Johnson
	 	 Title:	 Executive VP
      Sales & Brand Management
	 	 Address:	 6601 West
      Broad Street
	 	 	 Richmond,
      Virginia 23230
	 	 	 
	 	 	 


    

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


     

     

    THE
UNDERSIGNED PARTY enters into this Order and Consent Decree in the matter of
Philip Morris USA v.
Chesapeake Corporation and WTM I Company (Henrico County Va. No.
______).

     

    


     

    


     

    FOR
WTM I COMPANY

    


    


    
      	June 26, 2008	 Signature:	 /s/ J. P.
      Causey Jr.
	 Date	 Name
      (print):	 J. P. Causey
      Jr.
	 	 Title:	 Vice
      President
	 	 Address:	 3993 Howard
      Hughes Parkway
	 	 	 Suite 250
      North
	 	 	 Las Vegas,
      NV 89109
	 	 	 


       

    

     

     

    THE UNDERSIGNED PARTY
enters into this Order and Consent Decree in the matter of Philip Morris USA v.
Chesapeake Corporation and WTM I Company (Henrico County Va. No.
______).

     

    


     

    FOR
CHESAPEAKE CORPORATION

     

     

    
      	June 26, 2008	 Signature:	 /s/ J. P.
      Causey Jr.
	 Date	 Name
      (print):	 J. P. Causey
      Jr.
	 	 Title:	 Vice
      President
	 	 Address:	 1021 East Cary
      Street
	 	 	 Richmond,
      Virginia 23219
	 	 	 
	 	 	 


       

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    We ask
for this:

    


    


    


    /s/ T. A.
Broughton

    William
R. Mauck, Jr. (VSB #25439)

    Turner A.
Broughton (VSB #42627)

    WILLIAMS
MULLEN

    A
Professional Corporation

    Two James
Center

    1021 East
Cary Street

    Richmond,
VA  23219

    Telephone:  (804)
643-1991

    Facsimile:  (804)
783-6507

    


    


    Thomas H.
Milch (D.C. Bar #935338)

    Timothy
R. Macdonald (CO Bar #29180)

    Allison
B. Rumsey (D.C. Bar #450475)

    ARNOLD
& PORTER LLP

    555
Twelfth Street, N.W.

    Washington,
D.C. 20004

    Telephone:  (202)
942-5000

    Facsimile:  (202)
942-5999

    


    Counsel for
Plaintiff

    


    


    


    /s/ John K. Burke,
Jr.

    John K.
Burke, Jr. (VSB #16798)

    TROUTMAN
SANDERS LLP

    P.O. Box
1122

    Richmond,
VA  23218

    Telephone:  (804)
697-1210

    Facsimile:  (804)
698-5105

    


    Counsel for
Defendants