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SETTLEMENT AGREEMENT AND RELEASE
BETWEEN
NATIONAL HERITAGE LIFE INSURANCE COMPANY IN LIQUIDATION
AND
INVESTORS INSURANCE GROUP, INC.
This SETTLEMENT AGREEMENT AND RELEASE ("Agreement") is made on this
_____________ day of April, 1998, by the parties, ▇▇▇▇▇ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇,
Insurance Commissioner of the State of Delaware, in her capacity as Liquidator
(together with her Deputy Receiver(s)) of NATIONAL HERITAGE LIFE INSURANCE
COMPANY IN LIQUIDATION ("NHLIC"), for and on behalf of the Estate of NHLIC
("Statutory Liquidator of NHLIC") and NHLIC itself, and INVESTORS INSURANCE
GROUP, INC. ("IIG") a Florida Corporation, IIC, INC., an Oregon Corporation
("IIC"), and INVESTORS INSURANCE CORPORATION, a Delaware stock life insurance
company ("Investors")
RECITALS
WHEREAS, NHLIC is a Delaware life insurance company duly organized under the
laws of the State of Delaware, previously doing business under the auspices,
regulation and control of the Delaware Department of Insurance and now in
liquidation;
WHEREAS, IIG is a Florida Corporation, and the recorded owner of all the
issued and outstanding shares of IIC, which is the recorded owner of all the
issued and outstanding shares of Investors;
WHEREAS, IIG was formerly known as Gemco National, Inc. ("Gemco") and is the
successor to all obligations and liabilities of Gemco, including a certain
Debenture in the principal amount of Eight Million Dollars ($8,000,000.00)
(the "Debenture") issued to Corporate Life Insurance Company ("CLIC");
WHEREAS, on or about October 22, 1993 CLIC assigned and otherwise transferred
to NHLIC all right, title and interest to the Debenture and to the collateral
for the Debenture, including but not limited to the issued and outstanding
stock of IIC and Investors (the stock of IIC and Investors hereinafter
collectively referred to as the "Collateral");
WHEREAS, subsequent to the aforesaid assignment of the Debenture and
Collateral from CLIC to NHLIC, IIG refused to make payment of the quarterly
interest payments to the Statutory Liquidator of NHLIC under the Debenture,
claiming inter alia: that the assignment of the Debenture and Collateral from
CLIC to NHLIC was not valid; that the amount due under the Debenture was
subject to certain offsets, defenses, claims, and counterclaims arising from
the preassignment conduct of CLIC; that the amount due under the Debenture was
subject to certain offsets, defenses, claims and counterclaims arising from
the conduct of NHLIC; that the amount due under the Debenture was subject to
certain offsets, defenses, claims and counterclaims arising from the conduct
of the Delaware Department of Insurance and its representatives and; that the
Collateral was not pledged for the Debenture;
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WHEREAS, the disputes between the parties are and have been the subject of
ongoing litigation between the parties including: Investors Insurance Group.
Inc. v. Insurance Commissioner of the Pennsylvania Department of Insurance as
Statutory Liquidator of Corporate Life Insurance Company and Insurance
Commissioner of the State of Delaware as Statutory Receiver and/or
Rehabilitator and/or Liquidator of National Heritage Life Insurance Company,
Commw. Ct., No. 518 MD, 1995 (the "Pennsylvania Litigation"); in the Matter of
the Liquidation of National Heritage Life Insurance Company, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇
▇▇▇▇▇▇▇▇ ▇.▇. ▇▇. ▇▇▇▇▇ (the "Delaware Litigation"); and The ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇▇▇. Commissioner of Insurance of the State of Delaware as
Receiver of National Heritage Life Insurance Company v. Investors Insurance
Group. Inc., successor to Gemco National Inc. United States District Court,
Middle District of Florida, Orlando Division, No. 97-773-CV-ORL-19 (the
"Florida Litigation");
WHEREAS, Statutory Liquidator of NHLIC and IIG desire to amicably resolve
their disputes as to ownership of the Debenture; the amount due on the
Debenture; the right to dispose of the Collateral for the Debenture; and the
right to the proceeds of the Collateral;
WHEREAS, Statutory Liquidator of NHLIC and IIG further desire to resolve
amicably and settle all claims that they have or could ever have against the
other so that all claims between the Statutory Liquidator of NHLIC and IIG are
fully and finally resolved;
NOW, THEREFORE, in consideration of the promises, covenants and agreements set
forth below, and for such other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, and intending to be legally
bound, the parties hereby agree as follows:
TERMS AND CONDITIONS
1. OWNERSHIP OF DEBENTURE AND COLLATERAL. IIG, by this representation
contained in this Agreement and by such additional representations
contained in documents as NHLIC shall in its sole discretion require,
agrees that: (a) NHLIC is the sole legal, equitable, and beneficial
transferee and owner of the Debenture; (b) the transfer of the ownership of
the aforesaid Debenture to NHLIC occurred and was effective on October 22,
1993; (c) NHLIC has the exclusive right, power and authority to transfer
the Stock of IIC and Investors as satisfaction for the Debenture under such
terms and conditions, and for such consideration, as NHLIC in its sole
discretion deems appropriate; (d) in satisfaction of the amount due on the
Debenture, NHLIC is entitled to the entire proceeds from the disposition of
the Collateral.
2. PAYMENTS TO IIG. Upon 45 days following the execution of this Agreement,
or upon Court approval as described in Paragraph 17 of this Agreement,
whichever is later, NHLIC shall pay or cause to be paid to IIG the sum of
$637,711.00.
3. TRANSFER OF COLLATERAL TO NHLIC. Contemporaneous with the payment
set forth in Paragraph 2 of this Agreement, IIG, IIC, and Investors cause
all shares of stock of IIG and Investors Insurance Corporation to be
transferred to NHLIC, together with such other documents as NHLIC shall
reasonably require confirming the transfer to NHLIC or its assignee all
right title and interest to IIC and Investors.
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4. DOCUMENTS TO BE PRESENTED BY IIG UPON EXECUTION. Contemporaneous with
execution of this Agreement IIG shall present to NHLIC a certified
resolution of its Board of Directors, authorizing IIG to execute this
Agreement and directing IIG to take all steps necessary to effectuate
the terms of this Agreement. IIG shall further provide NHLIC with such
evidence as NHLIC shall require, including but not limited to opinion(s) of
counsel, confirming IIG's authority to enter this Agreement and to
effectuate its terms
5. DISMISSAL OF FLORIDA LITIGATION. Upon the mutual execution of this
Agreement by the parties, they shall jointly inform the Court that a
settlement is pending and request that the Florida Litigation be stayed
pending Court Approval as described in Paragraph 17 of this Agreement.
Contemporaneous with Court approval as more particularly described in
Paragraph 17 of this Agreement, the parties will take whatever steps as
are necessary to dismiss, with prejudice, all claims and counterclaims
asserted by or against the parties in the Florida Litigation.
6. DISMISSAL OF DELAWARE LITIGATION. Contemporaneous with the Court Approval
as more particularly described in paragraph 17 of this Agreement, the
parties will take whatever steps as are necessary to dismiss, with
prejudice, all claims and counterclaims asserted by or against the parties
in the Delaware Litigation.
7. WARRANTIES OF TITLE. IIG covenants, warrants and represents, to NHLIC and
its successors and assigns, that it is the beneficial and record owner of
all the issued and outstanding shares of stock of IIC, and that IIC is the
record and beneficial owner of all issued and outstanding shares of
Investors, and that the transfer of the shares of stock contemplated by
this Agreement will vest ownership of the shares of stock of IIC and
Investors in NHLIC, its successors and assigns, free and clear of any lien,
pledge, charge, security interest, encumbrance, title retention agreement,
adverse claim, option, proxy or voting trust agreement, and that 110 has
all necessary rights and authority to transfer the shares of stock
hereunder. IIG agrees to indemnify and hold harmless NHLIC and its
successors and assigns from and against any and all claims, demands, or
suits from any person, including but not limited to IIG, its stockholders,
directors, officers, employees, agents, successors, assigns, receivers,
trustees, involving or arising from the transfer of the shares of stock
contemplated by this Agreement
8. RELEASE BY NHLIC. Upon IIG's compliance with its obligations contained in
Paragraphs 1, 3, 4, 5 and 6, of this Agreement, The Receiver of NHLIC, for
and on behalf of the Estate of NHLIC and NHLIC itself, its successors,
appointees and assigns hereby agrees to release, acquit, and forever
discharge IIG, IIC, and Investors, their stockholders, directors, officers,
and representatives, from any and all causes of action, claims,
counterclaims, cross-claims, demands, damages, costs, expenses,
compensation, third party actions, suits at law or in equity, that NHLIC
has whether asserted or unasserted, against IIG, IIC, or Investors arising
out of the Debenture, including but not limited to all claims made or which
could have been made in the Pennsylvania Litigation, Delaware Litigation,
or Florida Litigation.
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9. RELEASE BY IIG. Upon the execution of this Agreement by the Parties
hereto, IIG, on behalf of itself, its stockholders, directors, officers,
representatives, agents, subsidiaries, affiliates, stockholders of
subsidiaries, directors of subsidiaries, officers of subsidiaries, agents
of subsidiaries, stockholders of affiliates, directors of affiliates,
officers of affiliates, agents of affiliates, successors and assigns of
itself, its subsidiaries and affiliates, hereby agrees to release,. acquit,
and forever discharge the Receiver of NHLIC together with her Deputy
Receivers, the Estate of NHLIC and NHLIC itself, the Department of
Insurance of the State of Delaware, the Insurance Commissioner of the State
of Delaware, together? with their representatives and agents (collectively
referred to as the "Released Parties") from any and all causes of action,
claims, counterclaims, cross-claims, demands, damages, costs, expenses,
compensation, third party actions, suits at law or in equity, that IIG or
its subsidiaries, affiliates, stockholders,. directors, officers, or agents
have, whether asserted or unasserted, against the released parties, arising
out of the Debenture, the regulation of Investors, including but not
limited to all claims made or which could have been made in the
Pennsylvania Litigation, Delaware Litigation, or Florida Litigation IIG, on
behalf of itself, IIG, Investors, and each of their stockholders,
directors, officers, agents and employees, agrees to indemnify and hold
harmless NHLIC and the Released Parties from and against any claim, damage,
loss and expense, including but not limited to attorneys' fees, arising
from any claim, action or defense asserted against the Released Parties by
IIG, IIC, Investors, or any of their stockholders, directors, officers,
agents, employees or assigns.
IIG, on behalf of itself, IIC, Investors, and each of their stockholders,
directors, officers, agents and employees, agrees to indemnify and hold
harmless NHLIC and the Released Parties from and against any claim, damage,
loss and expense, including but not limited to attorneys' fees, arising
from any claim, action or defense asserted against the Released Parties
arising from any inaccuracy in the statements set forth in Exhibit "A"
of this Agreement.
10. ASSIGNMENT BY IIG OF OPTION RIGHTS. For the consideration stated herein,
▇▇▇ assigns and transfers to NHLIC any and all rights that it may have in
and arising from a certain Stock Option Agreement ("Option") dated
September 13, 1991, and from a prior Stock Option Agreement dated March 28
1991, said Option(s) concerning 188,971 shares of stock of Adage, Inc.
IIG shall provide to NHLIC such documentation as NHLIC shall require
confirming and ratifying said assignment
11. IIG TO RETAIN TAX REFUND RIGHTS ON PRIOR FILED RETURNS. For the
consideration stated herein, NHLIC, agrees to cause Investors to assign to
IIG all Investors right title and interest to a certain federal tax refund
appearing on Page 2, Line 14, columns 2, 3, and 4 of the Annual Statement
of Investors Insurance Company for the Year Ended. December 31, 1997 filed
with the Department of Insurance of the state of Delaware.
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12. NOTICE OF AGREEMENT. The Statutory Liquidator of NHLIC shall have the
sole discretion to determine who, if anyone, shall receive notice of this
Agreement. IIG agrees that it will not give notice of this Agreement to
any third party without the prior written consent of the Statutory
Liquidator of NHLIC, provided, however, that IIG shall not be restricted
from disclosing this Agreement to the extent required by law, in which
event, NHLIC shall receive reasonable advance notice of such disclosure;
provided further however, that IIG may disclose this Agreement in response
to a lawful order, legal requirement or subpoena, after first, if
reasonably possible, giving reasonable notice thereof to the Statutory
Liquidator of NHLIC of intent to do so with the understanding that the
Statutory Liquidator of NHLIC may seek. to take lawful efforts to prevent
disclosure.
13. ASSIGNMENT. NHLIC may, without further consent or notice to any party to
this Agreement, assign its rights or delegate its duties under this
Agreement as NHLIC, in its sole discretion determines necessary to
effectuate this Agreement. However, such assignment or delegation by NHLIC
shall not relieve NHLIC of its responsibilities under this Agreement.
IIG, shall not assign or delegate its responsibilities or duties under
this Agreement without the express prior written consent of NHLIC. Such
assignment or delegation by IIG, shall, if consented to by NHLIC, not
relieve IIG or any other party to this Agreement of its responsibilities
under this Agreement.
14. BINDING EFFECT. This Agreement shall be binding upon and inure to the
benefit of NHLIC, its Receiver, Deputy Receivers, successors, appointees,
trustees, agents representatives, employees and assigns or any of their
heirs, executors, personal representatives and administrators; and IIG,
its stockholders, directors, officers, employees', agents and assigns, and
their respective heirs, executors, personal representatives and
administrators.
15. NON-WAIVER. Neither the failure nor any delay on the part of any party
hereto to exercise any right, remedy, power or privilege under this
Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any
other or further exercise of the same or of any other right, remedy, power
or privilege, nor shall any waiver of any right, remedy, power or
privilege with respect to any occurrence be construed as a waiver of such
right, remedy, power or privilege with respect to any other occurrence.
16. GOVERNING LAW. It is agreed that this Agreement shall be governed by,
construed, and enforced in accordance with the laws of the State of
Delaware and that any actions, causes of action, suits, claims, cross-
claims, counterclaims, or third party actions related to or arising out of
this Agreement shall be brought before the Court of Chancery of the State
of Delaware in and for New Castle County ("Delaware Court") in the
liquidation proceedings of NHLIC.
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17. COURT APPROVAL. The parties expressly understand that this Agreement is
subject to the approval of the Delaware Court in the NHLIC liquidation
proceedings. Within five (5) business days of the full execution of this
Agreement, the Statutory Liquidator of NHLIC shall petition the. Delaware
Court, with notice to the National Association of Life and Health
Insurance Guaranty Associations, for an order approving this Settlement
Agreement and Release in its entirety and authorizing and directing the
Statutory Liquidator of NHLIC to render performance in accordance with the
terms and conditions of this Settlement Agreement and Release. IIG shall
assist the Statutory Liquidator of NHLIC and fully cooperate with the
filing of the motion. The Statutory Liquidator of NHLIC agrees to seek
expedited treatment of this petition by the Delaware Court.
18. MODIFICATION OF AGREEMENT. Any modification of this Agreement or
additional obligation assumed by the parties hereto in connection with
this Agreement shall be binding only if evidenced in writing signed by
each party hereto or an authorized representative of each party hereto and
approved by the Delaware Court.
19. NON-ADMISSION. Nothing contained. herein shall constitute an admission of
liability by any party as to any claim, cause of action, defense,
counterclaim or other statement made in the litigations, however; this
Agreement shall constitute an admission by IIG, its affiliates and
subsidiaries, and their respective stockholders, directors, officers,
employees and agents, of the truth of the statements contained in
paragraphs 1 and 7 of this Agreement.
20. SEVERABILITY. The provisions of this. Agreement are independent of, and
separable from, each other, and no provision shall be affected or rendered
invalid or unenforceable by virtue of the fact that for any reason any
other or others of them may be invalid or unenforceable in whole or in
part unless the intent of the parties is significantly altered without the
invalid or unenforceable provision.
21. CAPTIONS The captions. used in this Agreement are inserted only as a
matter of convenience for reference, and they are not to be construed as
part of this Agreement. They in no way define, limit or describe the
scope or intent of this Agreement or any part hereof. Such captions shall
not affect this Agreement or any part hereof in any way.
22. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall become
binding when one or more counterparts hereof, individually or taken
together, shall bear the signatures of all of the parties reflected hereon
as the signatories.
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23. ENTIRE AGREEMENT. This Agreement shall constitute the entire agreement
between NHLIC, on the one part, and IIG, IIC and Investors, collectively,
on the second part. Any prior understanding or representation of any kind
preceding the date of this Agreement shall not be binding upon NHLIC
except to the extent incorporated in this Agreement. Each party to this
Agreement represents and warrants that sit has all requisite power and
authority to enter into this Agreement and to implement the transactions
contemplated herein, subject to the Court approval required by Paragraph
17 hereto, and that the signatories to this Agreement are duly authorized
to execute this Agreement on behalf of the respectively parties hereto.
Each party to this Agreement represents and warrants that this Agreement
has not been fraudulently induced either through active concealment of
material facts or nondisclosure of material facts.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed on
the date set forth above.
▇▇▇▇▇ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇, INSURANCE COMMISSIONER OF THE STATE OF DELAWARE, IN HER
CAPACITY AS THE STATUTORY LIQUIDATOR OF NATIONAL HERITAGE LIFE INSURANCE
COMPANY IN LIQUIDATION
BY:
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INVESTORS INSURANCE GROUP, INC.
ATTEST: BY:
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IIC, INC.
ATTEST: BY:
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IIC, INC.
ATTEST: BY:
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INVESTORS INSURANCE CORPORATION
ATTEST: BY:
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