SETTLEMENT AGREEMENT
THIS SETTLEMENT AGREEMENT, dated as of September 23, 1999 (as amended,
supplemented or otherwise modified and in effect from time to time, this
"AGREEMENT") is by and among 212 CERTIFICATE COMPANY, a Delaware corporation
(together with its permitted successors and assigns, the "ISSUER"), INTEGRITY
LIFE INSURANCE COMPANY, an Ohio insurance company (together with its permitted
successors and assigns, "INTEGRITY LIFE"), PARK AVENUE RECEIVABLES CORPORATION,
a Delaware corporation (together with its permitted successors and assigns,
"PARCO"), and THE CHASE MANHATTAN BANK, a New York banking corporation (together
with its permitted successors and assigns, "CHASE"), individually as APA Bank
(together with its permitted successors and assigns, in such capacity, the "APA
BANK") and as funding agent for the benefit of PARCO and the APA Bank (together
with its permitted successors and assigns in such capacity, the "FUNDING
AGENT"). Capitalized terms used herein and not otherwise defined herein shall
have the meanings assigned to such terms in, or incorporated by reference into,
the FAC Agreement (defined below).
WHEREAS, the Issuer, PARCO, the Funding Agent and the APA Bank have
entered into that certain Installment Face-Amount Certificate Agreement, dated
as of September 15, 1998 (as amended, supplemented or otherwise modified and in
effect, the "FAC AGREEMENT"), pursuant to which the Issuer has issued to the
Funding Agent, for the benefit of PARCO and the APA Bank, that certain
[REDACTED] Face-Amount Certificate dated as of February 23, 1999 (as amended,
supplemented or otherwise modified and in effect, the "FACE-AMOUNT CERTIFICATE);
WHEREAS, PARCO, the APA Bank and the Funding Agent have entered into
that certain Asset Purchase Agreement, dated as of September 15, 1998 (as
amended, supplemented or otherwise modified and in effect, the "ASSET PURCHASE
AGREEMENT");
WHEREAS, Integrity Life and Chase, as successor-in-interest to
Chemical Bank, have entered into that certain Termination Agreement, dated as of
September 10, 1999 (the "TERMINATION AGREEMENT") with respect to certain
transactions between them;
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WHEREAS, the parties hereto acknowledge and agree that one or more
Amortization Events and Liquidation Events have occurred and are continuing
under the FAC Agreement;
WHEREAS, in order to avoid the consequences of such Amortization
Events and Liquidation Events set forth in the FAC Agreement and the other
Transaction Documents, and to achieve a remedy beneficial to each of the Issuer,
Integrity Life, PARCO, the APA Bank and the Funding Agent, the parties hereto
have agreed to enter into this Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. PREPAYMENT OF INVESTED AMOUNT. On September 23, 1999 (the
"SETTLEMENT DATE"), the Issuer hereby agrees to pay to the Funding Agent, for
the benefit of PARCO and the APA Bank, [REDACTED] in immediately available
funds. The parties hereto acknowledge and agree that the foregoing payment by
the Issuer constitutes the aggregate proceeds from the Issuer's sales of the
remainder of its assets consisting of marketable securities (other than the Swap
Agreement). The Funding Agent shall apply such payment to the permanent
reduction of the Invested Amount under the Face-Amount Certificate and the FAC
Agreement. Immediately following (and conditioned upon the occurrence of) such
reduction of the Invested Amount, PARCO hereby notifies the Funding Agent and
the APA Bank that a PARCO Wind-Down Event has occurred and is continuing under
the Transaction Documents (such notice hereby also constituting a Sale Notice
under the Asset Purchase Agreement with the Purchase Date hereby designated as
September 23, 1999), and the APA Bank hereby purchases the PARCO Interest
pursuant to Section 2.1 of the Asset Purchase Agreement. The proceeds of such
purchase shall be delivered to PARCO pursuant to Section 2.1(b) of the Asset
Purchase Agreement. Following such sale of the PARCO Interest by PARCO to the
APA Bank, the Aggregate Commitment shall be reduced to zero, and the Funding
Agent shall deliver the Face-Amount Certificate to the APA Bank, as assignee of
PARCO. Each of the parties hereto hereby consents to all of the prior actions of
the Issuer regarding sales of the Pledged Collateral and the use of proceeds
thereof to reduce permanently the Invested Amount following the occurrence of
the initial Amortization Event and/or Liquidation Event.
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2. FACE AMOUNT CERTIFICATE. Immediately following (and conditioned
upon the occurrence of) the actions specified in Section 1 above, the APA Bank
shall deliver the Face-Amount Certificate to the Issuer in exchange for receipt
by the APA Bank of an assignment, in substantially the form of Exhibit A hereto
(the "ASSIGNMENT"), of all of the Issuer's right, title and interest in, to and
under the Swap Agreement, duly executed and delivered by the Issuer and
Integrity Life. Following receipt of the Assignment by the APA Bank and delivery
of the Face-Amount Certificate to the Issuer, the APA Bank shall succeed to all
of the rights of the Issuer in, to and under the Swap Agreement, including,
without limitation, the right to receive the payments which Integrity Life is
required to make pursuant to the Swap Agreement (collectively, the "SWAP
PAYMENT"). The parties hereto hereby agree that the total amount of the Swap
Payment is [REDACTED].
3. TERMINATION OF THE SWAP AGREEMENT. Integrity Life and the APA Bank
hereby agree that, upon (and conditioned upon the occurrence of) satisfactory
completion of the actions specified in Sections 1 and 2 above, subject to the
following proviso, the Swap Agreement and all transactions thereunder are hereby
terminated, and all of the rights, obligations and liabilities of the APA Bank
and Integrity Life are hereby terminated and forever discharged; PROVIDED that,
in consideration for such termination, and as additional conditions thereto, the
APA Bank and Integrity Life hereby agree that (i) the "Net Termination Amount"
(as defined in the Termination Agreement) payable by the APA Bank to Integrity
Life shall be, and hereby is, offset against all amounts now due and owing by
Integrity Life to the APA Bank under the Swap Agreement (and, in furtherance of
such intent, Integrity Life hereby releases and forever discharges the APA Bank
from any and all claims, damages, liabilities, costs and expenses now existing
or hereafter arising under the Termination Agreement, including, without
limitation, the APA Bank's obligation thereunder to pay the "Net Termination
Amount" to Integrity Life) and (ii) the APA Bank shall have received from
Integrity Life a promissory note substantially in the form of Exhibit B hereto,
duly executed by Integrity Life (the "PROMISSORY NOTE"). Notwithstanding
anything to the contrary contained herein, the parties hereto agree and
acknowledge that upon payment in full of the Promissory Note, all obligations
and liabilities of Integrity Life and/or the Issuer under the Swap Agreement
and/or the Face-Amount Certificate, as applicable, shall be deemed immediately
terminated and forever discharged.
It is the intent of the parties hereto that the transactions described
in clause (i) of the foregoing paragraph (the "Chase/Integrity Offset/Release")
shall have
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and be given full force and effect irrespective of any other ineffectiveness,
voiding or recission of this Agreement or any of the other transactions
contemplated herein (including without limitation by virtue of the PROVISOS to
Section 5 or 6 hereof) if the APA Bank so elects by written notice to Integrity
within 10 business days after the occurrence of any such ineffectiveness,
voiding or rescission; PROVIDED that the amount of the Chase/Integrity
Offset/Release, as long as it continues to be given full force and effect, shall
reduce the amount of any claim which the APA Bank otherwise might have against
Integrity and/or the Issuer).
4. Each party hereto (each, a "PARTY") hereby represents and warrants
to the other Parties that:
(a) The execution, delivery and performance of each of this Agreement,
the Assignment and the Promissory Note to which such Party is a party (as to
each such Party, such Party's the "RELEVANT DOCUMENTS") by such Party, and the
consummation by such Party of the transactions provided for in such Party's
Relevant Documents, have been duly authorized by all necessary action on the
part of such Party, and each of such Party's Relevant Documents has been duly
executed and delivered on behalf of such Party. Each of such Party's Relevant
Documents constitutes the legal, valid and binding obligation of such Party,
enforceable against such Party in accordance with its terms, except as may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
other similar laws affecting creditors' rights generally, now or hereafter in
effect, and except as such enforceability may be limited by general principles
of equity (whether considered in a suit at law or in equity).
(b) The execution and delivery of such Party's Relevant Documents, the
performance of the transactions contemplated by such Party's relevant Documents,
and fulfillment of the terms hereof and thereof, do not conflict with or violate
in any material respect any law or regulation applicable to such Party or
conflict with, result in any breach of any of the terms and provisions of, or
constitute (with or without notice or lapse of time or both) a default under,
the organizational documents of such Party or any indenture, mortgage, deed of
trust or other material contract, agreement or instrument to which such Party is
a party or by which it or its properties are bound.
(c) No authorization, consent, license, order or approval of,
registration or declaration with any governmental agency or other person or
entity is required
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to be obtained, effected or given by such Party hereto in connection with the
execution and delivery of such Party's Relevant Documents (other than those
which have been obtained and are in effect).
5. EFFECTIVENESS. This Agreement shall become effective on the first
day on which (i) each of the parties hereto shall have received an executed
counterpart of this Agreement and (ii) PARCO, the Funding Agent and the APA Bank
shall have received copies of a letter by the Department of Insurance of the
State of Ohio to Integrity Life approving the transactions contemplated by this
Agreement; PROVIDED that such effectiveness shall terminate, the parties hereto
shall be restored to their respective positions as if this Agreement had not
become effective, together with all of the rights, benefits, duties and
obligations associated therewith, if PARCO, the Funding Agent and the APA Bank
shall not have received an opinion of counsel to Integrity Life, in form and
substance reasonably acceptable to each of them, regarding corporate matters
pertaining to this Agreement and the Promissory Note by no later than October 1,
1999 (or such other date as to which PARCO, the Funding Agent and the APA Bank
shall have consented to in writing).
6. EXECUTION IN COUNTERPARTS; SEVERABILITY OF PROVISIONS. This
Agreement may be executed in any number of counterparts and by different parties
hereto on separate counterparts, each of which counterparts, when so executed
and delivered, shall be deemed to be an original and all of which counterparts,
taken together, shall constitute but one and the same Agreement. Delivery of an
executed counterpart of a signature page of this Agreement by rapidfax or
telecopy shall be effective as delivery of a manually executed counterpart of
this Agreement. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provision in any other jurisdiction; PROVIDED that, to the extent that any of
the transactions set forth in Section 1 through 3, inclusive, hereof is voided
or rescinded by a court or regulatory or other governmental authority of
competent jurisdiction (or if any order or decree of any such court or
regulatory or governmental authority shall have substantially the same effect),
the parties hereto shall be restored to their respective positions as if this
Agreement had not become effective, together with all of the rights, benefits,
duties and obligations associated therewith.
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7. CONFIDENTIALITY. The Issuer and Integrity Life shall consult with
PARCO, the Funding Agent and the APA Bank prior to issuing any press release or
any other public disclosure of the transactions contemplated by this Agreement
and shall not so disclose [REDACTED] without the prior written consent of such
parties.
8. CONSENTS; BINDING EFFECT. The execution and delivery by each of the
parties hereto of this Agreement shall constitute the written consent and/or
approval of each of them to this Agreement and the transactions contemplated
hereby and a written waiver of any notice or other requirement with respect
thereto, to the extent any such consent, approval or waiver is or may be
required under any Transaction Document or otherwise. This Agreement shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assigns.
9. GOVERNING LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York.
10. CAPTIONS. The captions in this Agreement are for convenience of
reference only and shall not define or limit any of the terms or provisions
hereof.
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IN WITNESS WHEREOF, the undersigned have executed this Settlement
Agreement as of the date and year first above written.
212 CERTIFICATE COMPANY, as Issuer
BY:
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Name:
Title:
INTEGRITY LIFE INSURANCE COMPANY
BY:
--------------------------------------
Name:
Title:
PARK AVENUE RECEIVABLES
CORPORATION
BY:
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Name:
Title:
THE CHASE MANHATTAN BANK, as
APA Bank
BY:
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Name:
Title:
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THE CHASE MANHATTAN BANK, as
Funding Agent
BY:
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Name:
Title:
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EXHIBIT A
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, in accordance with the Settlement Agreement
(defined below), 212 CERTIFICATE COMPANY, a Delaware corporation (the "ISSUER"),
does hereby assign, transfer and otherwise convey unto THE CHASE MANHATTAN BANK,
a New York banking corporation (including successors and assigns, "CHASE"), all
right, title and interest of the undersigned, whether now owned or hereafter
acquired, in, to and under the Swap Agreement and all transactions arising
thereunder and all present and future claims, demands, causes of action and
choses in action in respect of the foregoing and all payments on or under and
all proceeds of every kind and nature whatsoever in respect of the foregoing,
including all proceeds of the conversion thereof, voluntary or involuntary, into
cash or other liquid property, all cash proceeds, accounts, accounts receivable,
notes, drafts, acceptances, chattel paper, checks, deposit accounts, insurance
proceeds, condemnation awards, rights to payment of any and every kind and other
forms of obligations, instruments and other property which at any time
constitute all or part of, or are included in, the proceeds of any of the
foregoing (all of the foregoing, the "ASSIGNED PROPERTY"). Upon delivery of this
Assignment by the Issuer to Chase, Chase shall succeed to all of the rights of
the Issuer in, to and under the Assigned Property, and the rights of the Issuer
shall terminate.
This Assignment is made pursuant to and upon the representations,
warranties and agreements on the part of the undersigned contained in the
Settlement Agreement and is to be governed by the terms of the Settlement
Agreement.
This Assignment shall be governed by, and construed in accordance
with, the laws of the State of New York.
Capitalized terms used herein and not defined herein shall have the
meanings assigned to such terms in, or incorporated by reference into, that
certain Settlement Agreement, dated as of September 23, 1999 (the "SETTLEMENT
AGREEMENT"), by and among the Issuer, Integrity Life Insurance Company, an Ohio
insurance company, Park Avenue Receivables Corporation, a Delaware corporation,
and Chase.
A-1
IN WITNESS WHEREOF, the undersigned has caused this Assignment to be
duly executed and delivered as of September 23, 1999.
212 CERTIFICATE COMPANY
BY:
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Name:
Title:
Consented and agreed to as of
the date above written:
INTEGRITY LIFE INSURANCE
COMPANY
By:
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Name:
Title:
A-2
EXHIBIT B
FORM OF PROMISSORY NOTE
[REDACTED] September 23, 1999
FOR VALUE RECEIVED, INTEGRITY LIFE INSURANCE COMPANY (together with
its permitted successors and assigns, the "PAYOR") hereby promises to pay to the
order of THE CHASE MANHATTAN BANK, at 270 Park Avenue, New York, New York 10017
(including successors and assigns, "CHASE"), the principal sum of [REDACTED], in
lawful money of the United States of America and in immediately available funds.
Such entire outstanding amount, together with all accrued and unpaid interest
thereon, shall be payable on the earlier of (i) [REDACTED] and (ii) the
effective date of a Transaction (defined below) (such date, the "PAYMENT DATE").
As used herein, the term "TRANSACTION" shall mean, whether in one or a series of
transactions, (a) any merger, consolidation, reorganization, joint venture or
other business combination pursuant to which any material business of the Payor
or any subsidiary [REDACTED] (collectively, the "SUBJECT COMPANIES") is combined
with that of any other person or entity (a "PURCHASER"), (b) the acquisition
directly or indirectly by a Purchaser by way of tender or exchange offer (which
shall be deemed to include any amendment, variation, revision or extension
thereof), negotiated purchase or other scheme or arrangement or any other means
of acquiring all or any portion of the then outstanding capital stock of any
Subject Company, other than in the ordinary course of business; and (c) the
acquisition by a Purchaser, directly or indirectly, through public or private
purchases or otherwise of all or any portion of the assets, properties and/or
businesses of, or any right to all or any portion of the revenues or income of,
any Subject Company by way of a negotiated purchase, lease, license, exchange,
joint venture, purchase of newly issued securities or any other means.
Interest in respect of the outstanding principal amount of this
Promissory Note shall accrue at a per annum rate of [REDACTED] payable on the
Payment Date (on past due amounts, at a per annum rate of [REDACTED] payable on
demand) to Chase at the address specified above.
B-1
[REDACTED]
Following the Payment Date, or upon the occurrence of an Insolvency
Event (defined below) with respect to the Payor, all amounts due and owing under
this Promissory Note immediately shall become due and owing automatically
without the need for presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Payor. As used herein, "INSOLVENCY EVENT"
means the occurrence of any of the following events: (a) the Payor is wound up
or dissolved or there is appointed over it or a substantial part of its assets a
receiver, administrator, administrative receiver, trustee or similar officer; or
(b) the Payor (i) ceases to be able to, or admits in writing its inability to,
pay its debts as they become due and payable, or makes a general assignment for
the benefit of, or enters into any legal composition or arrangement with, its
creditors generally; (ii) applies for or consents (by admission of material
allegations of a petition or otherwise) [REDACTED] to the appointment of a
receiver, trustee, assignee, custodian, liquidator or sequestrator (or other
similar official, including but not limited to the Superintendent of the
Department of Insurance for the State of Ohio as a result of an order of
rehabilitation or liquidation issued subsequent to the date hereof) over any
substantial part of its properties or assets, or authorizes such an application
or consent, or proceedings seeking such appointment are commenced without such
authorization, consent or application against such person or entity; (iii)
authorizes or files a voluntary petition in bankruptcy, or applies for or
consents (by admission of material allegations of a petition or otherwise) to
the application of any bankruptcy, insolvency or similar law, or authorizes such
application or consent, or proceedings to such end are instituted against such
person or entity without such authorization, application or consent; or (iv)
permits or suffers all or any substantial part of its properties or assets to be
sequestered or attached by court order.
The Payor shall pay all costs of collection of any amount due
hereunder when incurred including, without limitation, reasonable attorney's
fees and expenses, and including all costs and expenses actually incurred in
connection with the pursuit by Chase of any of its rights or remedies referred
to herein.
If Payor defaults on its obligations under this Promissory Note, or if
an Insolvency Event shall occur and be continuing, the claims of Chase under
this Promissory Note shall be entitled to the same rights and priority against
the assets of the Payor as the claims of 212 Certificate Company, a Delaware
corporation ("212
B-2
CERTIFICATE COMPANY") against the Payor under that certain ISDA Master
Agreement dated as of September 15, 1998, together with the accompanying
Schedule and Confirmation, each dated as of September 15, 1998, between the
Payor and 212 Certificate Company (which claims and rights have been duly
assigned by 212 Certificate Company to Chase).
The Payor hereby waives presentment, notice of dishonor, protest and
other notice or formality with respect to this Promissory Note.
This Note shall be governed by, and construed in accordance with, the
laws of the State of New York.
IN WITNESS WHEREOF, the undersigned has executed and delivered this
Promissory Note as of September 23, 1999.
INTEGRITY LIFE INSURANCE COMPANY
By:
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Name:
Title:
B-3