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HEI Exhibit 10.20
SETTLEMENT AGREEMENT AND GENERAL RELEASE
This Settlement Agreement and General Release ("Settlement
Agreement") is made and entered into on the 10th day of February, 1994, by and
between (a) Linda Chu Takayama ("Takayama"), not individually, but in her
capacities as (i) the Insurance Commissioner of the State of Hawaii, and, as
such, the representative of the interests of the State of Hawaii in bringing
proceedings for relief in the interests of policyholders and creditors of
insurers and the public, (ii) the Rehabilitator of The Hawaiian Insurance &
Guaranty Company, Limited ("HIG"), (iii) the Liquidator of United National
Insurance Company, Ltd. ("UNICO") and Hawaiian Underwriters Insurance Co., Ltd.
("HUI") and of the "Estate" as that term is used in the Plan (as hereafter
defined), and (iv) in her capacity as Rehabilitator of HIG and Liquidator of
UNICO and HUI, the representative of the respective policyholders, claimants
and creditors of HIG, UNICO and HUI, (b) HIG, UNICO and HUI (collectively, the
"HIG Group"), each Hawaii corporations, (c) the Hawaii Insurance Guaranty
Association ("HIGA"), for itself and on behalf of its past, present and future
member insurers and their past, present and future policyholders, (d) Hawaiian
Electric Industries, Inc. ("HEI"), a Hawaii corporation, on behalf of itself,
its direct and indirect past, present and future
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subsidiaries (other than the HIG Group) and the past, present and future
directors, officers, employees and representatives of HEI and its direct
and indirect past, present and future subsidiaries (including the HIG
Group), (e) HEI Diversified, Inc. ("HEIDI"), a Hawaii corporation, on
behalf of itself and its past, present and future directors, officers,
employees and representatives, and (f) Robert F. Clarke ("Clarke"),
Edward J. Blackburn ("Blackburn"), Robert F. Mougeot ("Mougeot"),
Thomas S. Adams ("Adams"), Gary L. Kirby ("Kirby"), David L. Ward ("Ward")
and Neal Kunde ("Kunde"), individually and in their capacities as past or
present directors, officers and/or employees of HEI, HEIDI, HIG, HUI, and
UNICO and/or of HEI's other direct and indirect subsidiaries (collectively,
the "Individual Defendants"). Where the context and circumstances require,
the name "Takayama" as used herein shall include any of her successors as
Insurance Commissioner of the State of Hawaii and/or as
Rehabilitator/Liquidator of the HIG Group.
W I T N E S S E T H:
WHEREAS, HEI acquired substantially all of the common stock of HIG
from IU International Corporation pursuant to an Acquisition Agreement dated as
of June 5, 1987 (the "Acquisition Agreement"), and the remainder of the common
stock of HIG from the individual owners thereof pursuant to a merger completed
on June 30, 1987;
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WHEREAS, HIG has at all relevant times been the owner of all of
the issued and outstanding common stock of UNICO and HUI;
WHEREAS, HEI is the owner of all of the common stock of HEIDI;
WHEREAS, all of the common stock of HIG was transferred by HEI to
HEIDI in 1991 and HEIDI is currently the holder of record of all of said common
stock;
WHEREAS, from time to time, HEI and/or one or more of its direct
or indirect subsidiaries have been parties to one or more intercompany
agreements pursuant to which computer, administrative, employee and other
services were provided to the HIG Group and payments have been made by the HIG
Group (collectively, the "Intercompany Agreements"), all of which Intercompany
Agreements have expired and/or been terminated save and except for that certain
Intercompany Agreement entitled "Agreement" between HIG and Hawaiian Electric
Company, Inc. ("HECO") dated May 14, 1993 (the "Computer Services Agreement");
WHEREAS, HEI, HEIDI, HIG and other direct and indirect
subsidiaries of HEI are parties to that certain Tax Allocation Agreement dated
January 15, 1991 (the "Tax Allocation Agreement"), pursuant to which the HIG
Group is included in HEI's consolidated federal tax returns and related tax
payments and benefits are shared in accordance with the terms of the Tax
Allocation Agreement;
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WHEREAS, by reason of the extraordinary insurance claims resulting
from Hurricane Iniki in September of 1992, the liabilities of the HIG Group
were estimated, on or about December 1, 1992, to exceed substantially the
assets of the HIG Group and HEI decided that it would not contribute additional
capital to the HIG Group;
WHEREAS, by reason of the impaired capital of the HIG Group, the
HIG Group agreed to operate pursuant to a supervision order issued by the
Insurance Commissioner of the State of Hawaii on December 2, 1992, and the HIG
Group was placed in formal rehabilitation proceedings in the Circuit Court for
the First Circuit for the State of Hawaii (the "Rehabilitation Court") on
December 24, 1992 (the "Rehabilitation Proceedings");
WHEREAS, on April 12, 1993, a lawsuit (the "Takayama Suit") was
filed by Takayama (as Rehabilitator/Liquidator of the HIG Group) and the HIG
Group in the Circuit Court for the Fifth Circuit of the State of Hawaii, Civil
No. 930087, against HEI, HEIDI, Clarke, Blackburn, Mougeot, Adams, Kirby, Ward,
Kunde and various DOE defendants, alleging numerous theories upon which
defendants, and each of them, were allegedly liable for losses suffered by the
HIG Group, and the complaint in such suit was amended in July 1993, among other
things, to add HIGA as an additional plaintiff;
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WHEREAS, HEI, HEIDI and the Individual Defendants have filed
answers to the First Amended Complaint in the Takayama Suit, denying the
material allegations thereof, denying any wrongdoing or liability of any kind
whatsoever, raising various affirmative defenses and asserting counterclaims
against Takayama and HIGA;
WHEREAS, a formal rehabilitation plan (the "Plan") was approved by
the Rehabilitation Court in the Rehabilitation Proceedings on May 25, 1993;
WHEREAS, HEI and its direct or indirect subsidiaries have from
time to time been insured under policies issued by HIG or other members of the
HIG Group (the "HIG Policies"), and claims have been made which are covered
under certain of those policies (some of which claims have been paid and others
of which are pending) and additional claims may be made in the future that are
covered by the HIG Policies if such claims arise out of events occurring during
the relevant policy periods, which additional claims are subject to the Plan;
WHEREAS, pursuant to the Plan, HIG has continued to operate in
rehabilitation to sell property and automobile insurance, and UNICO and HUI are
being liquidated;
WHEREAS, the Plan contemplates that any settlement of the Takayama
Suit must be approved by the Rehabilitation Court in the Rehabilitation
Proceedings;
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WHEREAS, each of the parties hereto has concluded that it is in
its respective best interests, and in the respective best interests of any
constituencies or interests represented by such parties (as hereinabove set
forth) and their respective predecessors, successors and assigns, mutually,
finally and in good faith to compromise and settle the Takayama Suit and
related matters on the terms and subject to the conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and the mutual
promises contained herein, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Settlement and Compromise; No Admission of Fault,
Wrongdoing or Liability. The parties hereto expressly acknowledge that each
party denies any wrongdoing of any kind whatsoever, denies liability for any
and all claims that were made or could have been made against such party in the
Takayama Suit and has entered into this Settlement Agreement solely in order to
compromise disputed claims and to avoid the expense, inconvenience, distraction
and risk of further protracted litigation. Each party hereto acknowledges and
represents that this settlement is entered into in good faith and that the
terms hereof are fair, reasonable and in their respective best interests and in
the respective best interests of the public, the past, present and future
policyholders and creditors of HIG, UNICO, HUI and the past, present and future
members of
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HIGA and their respective past, present and future policyholders. Nothing
contained in this Settlement Agreement is intended to be, or shall be
deemed to be, an admission of any liability by any party or an admission of
the existence of any facts upon which liability could be based.
2. Final Approval by Rehabilitation Court and Dismissal with
Prejudice of Takayama Suit. This Settlement Agreement is subject to and
conditioned on (a) obtaining a final order in the Rehabilitation Proceedings
approving this settlement and (b) obtaining a final dismissal with prejudice of
the Takayama Suit. The "Rehabilitation Approval Date" shall be (a) 35 days
from the date an order approving this Settlement Agreement in the form and
substance agreed to by each of the parties hereto (the "Rehabilitation Approval
Order") has been entered in the Rehabilitation Proceedings, if an appeal has
not been taken therefrom, or (b) if an appeal is taken from such order, the
date on which the Rehabilitation Approval Order is affirmed, without
modification, by a reviewing court and there are no further available rights of
appeal from the Rehabilitation Approval Order. Takayama (as
Rehabilitator/Liquidator) will promptly file a motion in the Rehabilitation
Proceedings seeking entry of the Rehabilitation Approval Order, and provide
such notice thereof as will properly advise all interested parties of the
filing and substance of such motion, including providing an advance copy of
this Settlement
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Agreement, on such date as Takayama and HEI shall agree, to such third parties
as Takayama shall identify. HEI agrees to bear the costs of providing such
notice up to $25,000. Each party hereto agrees to use its best efforts to
persuade the Court in the Rehabilitation Proceedings to approve this settlement
and to enter the Rehabilitation Approval Order, agrees that it will not appeal
the Rehabilitation Approval Order and agrees that it will use its best efforts
to obtain affirmance of the Rehabilitation Approval Order if appealed by a
third party.
Within three (3) business days after the deposit into escrow
required under paragraph 5 hereof, the parties hereto shall execute and present
(or cause their attorneys to execute and present) to the Circuit Court for the
Fifth Circuit of the State of Hawaii for approval and filing in the Takayama
Suit a stipulation for dismissal with prejudice of all parties and all claims
therein, including all counterclaims, in the form and substance agreed to by
each of the parties hereto (the "Final Dismissal Stipulation"), pursuant to and
in conformity with the requirements of the Hawaii Rules of Civil Procedure and
any applicable Rules of the Circuit Courts for the State of Hawaii. Each party
hereto agrees to use its best efforts to persuade the Court in the Takayama
Suit to enter the Final Dismissal Stipulation, agrees that it will not appeal
from the Final Dismissal Stipulation or take any other action to modify or set
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it aside and agrees that it will use its best efforts to obtain affirmance of
the Final Dismissal Stipulation in the event any third party attempts to appeal
therefrom. The "Final Approval Date" shall be (a) 35 days from the date that
the Final Dismissal Stipulation has been entered in the Takayama Suit, if an
appeal has not been taken therefrom, or (b) if an appeal is taken therefrom,
the date on which the Final Dismissal Stipulation is affirmed, without
modification, by a reviewing court and there are no further available rights of
appeal from the Final Dismissal Stipulation.
In the event this Settlement Agreement is not approved by the
Rehabilitation Court by entry of the Rehabilitation Approval Order (in form and
substance acceptable to each party hereto), or in the event the Rehabilitation
Approval Order is modified or vacated, or in the event the Rehabilitation
Approval Order is reversed or modified on appeal, or in the event that the
Final Dismissal Stipulation (in form and substance acceptable to each party
hereto) is not entered or, if entered, is modified or vacated or reversed on
appeal, then in any of such events, this Settlement Agreement shall be null and
void and of no force and effect; provided, however, that the agreements set
forth in paragraphs 19 and 20 hereof shall survive any termination of this
Settlement Agreement and remain in full force and effect.
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3. General Release in Favor of HEI, HEIDI, the Individual
Defendants and Others. Effective upon, and conditioned upon the occurrence of,
the Payment Date (as defined in paragraph 5 below), Takayama (in each of her
respective capacities and on behalf of each of the constituencies she
represents, as hereinabove set forth), HIGA (for itself and on behalf of each
of the constituencies it represents as hereinabove set forth), HIG (for itself
and its predecessors, successors and assigns), UNICO (for itself and its
predecessors, successors and assigns) and HUI (for itself and its predecessors,
successors and assigns) (each of the foregoing being a "Takayama-Group
Releasing Party") for and in consideration of the receipt by Takayama of the
Settlement Sum (as defined in paragraph 5 below), the sufficiency of which is
hereby acknowledged, each hereby forever releases and discharges each
"HEI-Group Released Party" (as defined below) from the "HEI-Group Released
Claims" (as defined below).
Each of the following is an "HEI-Group Released Party": (i) HEI;
(ii) HEIDI; (iii) the past, present and future direct and indirect subsidiaries
of HEI (other than the HIG Group), provided that a future direct or indirect
subsidiary of HEI shall not be an HEI-Group Released Party with respect to any
claims that any Takayama-Group Releasing Party may have against it prior to the
time it became such a subsidiary; (iv) the respective past, present and future
officers,
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directors and employees of HEI, HEIDI and/or any direct or indirect subsidiary
of HEI (including the HIG Group), and their heirs and personal representatives,
provided that any such future officer, director or employee shall not be an
HEI-Group Released Party with respect to any claims that any Takayama- Group
Releasing Party may have against such person prior to the time such person
became such officer, director or employee; (v) the Individual Defendants,
individually and in their capacities as present or past officers, directors
and/or employees of HEI, HEIDI, HIG, UNICO, HUI and/or any other direct or
indirect subsidiary of HEI, and the Individual Defendants' respective heirs and
personal representatives; (vi) the past, present and future stockholders of HEI
with respect to claims that might be asserted against them by reason of their
stockholder capacity, but any such stockholder shall not be an HEI-Group
Released Party with respect to claims that might be asserted against such
stockholder in any other capacity unless such other capacity (e.g., as a former
HIG director or officer) is identified as an HEI-Group Released Party; and
(vii) the past and present agents, representatives, attorneys, auditors,
actuaries and consultants of HEI, HEIDI and the Individual Defendants, provided
that no such agent, representative, attorney, auditor, actuary or consultant
shall be an HEI-Group Released Party with respect to claims that arise out of a
contract with or a duty owed directly to a Takayama-Group
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Releasing Party (or owed indirectly in the case of subrogated claims arising
under insurance policies) and that are not dependent upon such person's
relationship to HEI and/or HEIDI (except that this proviso shall not apply to
any such person's employment in connection with the Takayama Suit and/or in
connection with the HIG Group's insolvency).
The "HEI-Group Released Claims" include any and all claims,
demands, causes of action, obligations, damages, liabilities and all other
claims of any kind, whether known or unknown, liquidated or unliquidated,
including costs, expenses and attorneys' fees, but exclusive of the "HEI-Group
Excepted Claims" (as defined below), that each and any of the Takayama-Group
Releasing Parties, and each individual, corporation and other entity whose
interests are represented for purposes of this settlement by Takayama and HIGA,
ever had, now has or may in the future have against any HEI-Group Released
Party by reason of any cause, matter, or event whatsoever from the beginning of
the world to the Payment Date arising out of or connected in any way with the
business, operations, and/or insolvency of HIG, UNICO and/or HUI, including,
but not limited to, any and all claims relating to, based upon, arising out of
or having connection in any way whatsoever with (a) any act, omission, cause or
matter that is in whole or in part the subject of or asserted, or that could
have been asserted, in the Takayama Suit, (b) any and all claims relating to
the
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impact of Hurricane Iniki on the HIG Group, HEI, HEIDI and/or the Individual
Defendants, (c) any and all claims relating to the management and/or operation
of the HIG Group and the administration of claims against the HIG Group, (d)
any indemnity agreements made by HEI and/or HEIDI, (e) the Acquisition
Agreement, (f) any of the Intercompany Agreements, (g) the HIG Policies and/or
payments made thereunder, (h) the Insurance Code of the State of Hawaii, and/or
(i) any and all other claims on behalf of or liabilities owing or allegedly
owing to any Takayama-Group Releasing Party by any HEI-Group Released Party.
This general release shall not release the "HEI- Group Excepted
Claims", which are (A) claims by Takayama (as Liquidator) and/or by HIGA for
overcharging or price gouging asserted against contractors or suppliers in
connection with labor and materials supplied to policyholders of the HIG Group
in connection with repairs necessitated by Hurricane Iniki, whether or not such
person would in any other respect be an HEI-Group Released Party; (B) the
obligations of HEI and its direct and indirect subsidiaries under the Tax
Allocation Agreement, which obligations shall be governed solely by the terms
thereof and paragraph 8 hereof; (C) the Computer Services Agreement, and the
obligations arising thereunder, which agreement shall remain in force in
accordance with its terms until terminated by the parties thereto; (D) the
obligations of the
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HEI-Group Released Parties under this Settlement Agreement; (E) tort and/or
other claims by Takayama (as Liquidator) and/or by HIGA arising out of acts,
omissions or events occurring solely after the date of execution of this
Settlement Agreement, but not including (aa) any claims that were made or could
have been made in the Takayama Suit and/or in the Rehabilitation Proceeding or
(bb) any claims relating to or arising out of Hurricane Iniki and/or the
insolvency of the HIG Group; (F) claims asserted by Takayama (as Liquidator)
and/or by HIGA against a person identified herein as an HEI-Group Released
Party (e.g., an HEI stockholder), where such claims are of a type not released
in this paragraph 3 (e.g., a claim against a stockholder that is not based on
such person's status as a stockholder would not be released, except that such
person would be released if such person also falls within another category of
HEI- Group Released party, such as an HEI or HIG officer or director); and/or
(G) claims reserved pursuant to paragraph 21 hereof.
It is expressly understood that nothing in this Settlement
Agreement shall operate to release or abrogate in any fashion the powers or
rights of Takayama as Insurance Commissioner to regulate the business of
insurance in the State of Hawaii.
4. General Release in Favor of Takayama, HIG, UNICO, HUI and
HIGA. Effective at the same time the release
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set forth in paragraph 3 hereof becomes effective, HEI and HEIDI, on behalf of
themselves and their direct and indirect subsidiaries, and the Individual
Defendants, on behalf of themselves and their heirs and personal
representatives (each of the foregoing being an "HEI-Group Releasing Party" for
purposes of this paragraph 4), for good and valuable consideration, the
sufficiency of which is hereby acknowledged, each hereby forever releases and
discharges the "Takayama-Group Released Parties" (as defined below) from the
"Takayama-Group Released Claims" (as defined below).
Each of the following is a "Takayama-Group Released Party": (i)
Takayama (in each of her respective capacities as set forth above); (ii) HIG;
(iii) HUI; (iv) UNICO; (v) the Estate (as defined in the Plan); (vi) HIGA (for
itself and in its representative capacities as set forth above); and (vii) the
respective present officers, directors, agents, employees, representatives and
attorneys of Takayama, HIG, HUI, UNICO and HIGA.
The "Takayama-Group Released Claims" include any and all claims,
demands, causes of action, obligations, damages, liabilities and all other
claims of any kind, whether known or unknown, liquidated or unliquidated,
including costs, expenses and attorneys' fees but exclusive of the "Takayama-
Group Excepted Claims" (as defined below), that any HEI-Group Releasing Party
ever had, now has or may have against any
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Takayama-Group Released Party by reason of any cause, matter, or event
whatsoever from the beginning of the world to the Payment Date arising out of
or connected in any way with the business, operations and/or insolvency of HIG,
UNICO and/or HUI, including, but not limited to, any and all claims relating
to, based upon, arising out of or having connection in any way whatsoever with
(a) any act, omission, cause or matter that was in whole or in part the subject
of or asserted, or that could have been asserted, in the Takayama Suit, (b) any
and all claims relating to the impact of Hurricane Iniki on the HIG Group, (c)
any and all claims relating to the management and/or operation of the HIG Group
and the administration of claims against the HIG Group, (d) the Plan and/or the
Rehabilitation Proceedings, (e) the Insurance Code of the State of Hawaii
and/or (f) claims by the Individual Defendants or others for indemnification
(except as provided in paragraph 6 hereof).
This general release shall not release the "Takayama-Group
Excepted Claims", which are (A) claims and/or rights of HEI and/or its
affiliates under the HIG Policies and/or the claims or rights of the Individual
Defendants or any other HEI-Group Releasing Party under any policies issued by
HIG, UNICO or HUI; (B) the obligations of HIG, UNICO and HUI under the Tax
Allocation Agreement, which obligations shall be governed solely by the terms
thereof and paragraph 8 hereof; (C) the
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Computer Services Agreement, and the obligations arising thereunder, which
agreement shall remain in force in accordance with its terms until terminated
by the parties thereto; (D) the obligations of the Takayama-Group Released
Parties under this Settlement Agreement; and/or (E) claims reserved pursuant to
paragraph 21 hereof.
5. Settlement Payment. On or before ten (10) business days
following entry of the Rehabilitation Approval Order in the Rehabilitation
Proceedings, HEI shall pay (or cause to be paid) to First Hawaiian Bank or such
other financial institution as HEI and Takayama shall agree (the "Escrow
Agent") the sum of Thirty- Two Million Dollars ($32,000,000; the "Settlement
Sum") by wire transfer in same-day funds, pursuant to escrow instructions
consistent with this Settlement Agreement and otherwise reasonably satisfactory
to HEI, Takayama and the Escrow Agent. The Settlement Sum shall be held by
Escrow Agent on the following terms and conditions: (a) the Settlement Sum
shall be held by the Escrow Agent in investments approved by HEI and Takayama;
(b) the Settlement Sum shall be the property of HEI and be pledged to Takayama
to secure HEI's obligation to pay the same to Takayama on the Final Approval
Date as hereinbelow provided; (c) the Settlement Sum, together with interest
earned thereon in escrow (less the fee of the Escrow Agent), shall be returned
to HEI if this Settlement Agreement shall be terminated pursuant to the last
paragraph of paragraph 2
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hereof; and (d) the Settlement Sum, together with interest earned thereon in
escrow shall be disbursed to Takayama upon the Final Approval Date (and HEI
shall pay any fees due the Escrow Agent). Upon the Final Approval Date, HEI
and Takayama shall deliver such instruments as Escrow Agent may reasonably
require in order to direct and authorize Escrow Agent to pay the Settlement
Sum, together with interest to Takayama (as representative of the respective
policyholders, claimants and creditors of HIG, including UNICO and HUI, as
provided in the Plan) in full, final and complete settlement of the HEI-Group
Released Claims, by wire transfer in same-day funds. The date on which such
payment is made shall be referred to herein as the "Payment Date."
6. Defense and Hold Harmless Agreements. HIGA agrees to
indemnify, defend and hold harmless each HEI-Group Released Party and each
Takayama-Group Released Party with respect to any and all claims arising out of
or related in any way to the business, operations and/or insolvency of the HIG
Group and/or the impact of Hurricane Iniki brought against any such Released
Party by or on behalf of any member of HIGA.
Takayama (as Liquidator) and HIGA, respectively, each agrees to
defend and hold harmless each HEI-Group Released Party with respect to any and
all claims for indemnity, contribution, subrogation, reimbursement or the like,
however characterized, made against such HEI-Group Released Party by any person
against whom Takayama (as Liquidator) and/or HIGA asserts claims arising out of
or related in any way to the
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business, operations and/or insolvency of the HIG Group and/or the impact of
Hurricane Iniki; provided, however, that this obligation to defend and hold
harmless shall not apply to a claim asserted by such person against an
HEI-Group Released Party of a type that would be an HEI-Group Excepted Claim if
asserted against that HEI-Group Released Party by a Takayama-Group Releasing
Party; and provided, further, that Takayama and/or HIGA, as the case may be,
shall have the right to select counsel to defend claims covered under this
paragraph and to control the defense and settlement of such claims, provided
that no such settlement may be made without the consent of the party protected
hereunder, which consent may not be unreasonably withheld. For purposes of the
preceding proviso, it is agreed that consent may not be withheld if the
settlement will be effectuated at no cost to an HEI-Group Released Party and
will not involve any admission of liability or wrongdoing or entail
consequences that are materially adverse to an HEI-Group Released Party.
Takayama's payment obligations under this paragraph 6 shall be an
administrative expense of liquidation of UNICO, HUI and the Estate, and the
obligations of Takayama and HIGA under this paragraph 6 shall include the
obligation to reduce any judgment or recovery against such person in an amount
equal to any judgment or recovery which such person may obtain against any
HEI-Group Released Party.
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The agreements in this paragraph 6 to defend and hold harmless the
HEI-Group Released Parties are in addition to and not in lieu of any other
indemnity and defense rights and protections that HEI-Group Released Parties
may have under corporate articles or by-law provisions, policies of insurance,
contract, statute, common law or otherwise, all of which indemnity and defense
rights and protections are hereby expressly reserved.
7. Transfer of HIG Stock. Effective at 11:59 p.m. on the day
following the Payment Date, HEIDI will surrender to HIG all of the common stock
of HIG held by HEIDI (and any affiliate of HEI or HEIDI) and such shares shall
be cancelled. At the opening of business on the second day following the
Payment Date, HIG will issue to Takayama (as representative of the respective
policyholders, claimants and creditors of HIG, including without limitation
UNICO and HUI, as provided in the Plan) or to such third party (who shall not
be affiliated in any way with HEI or HEIDI and who shall be willing to receive
such shares) as Takayama shall designate in writing not later than the Payment
Date, shares of common stock of HIG, which shall then constitute all of the
issued and outstanding common stock of HIG. Takayama shall immediately cause
such surrender, cancellation and issuance to be recorded on the stock transfer
books of HIG. The issuance of the shares of common stock of HIG to Takayama or
such third party, as contemplated hereunder,
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shall be in exchange for and in full and complete discharge of HIG's
obligations under the Intercompany Reinsurance Agreements (as defined in the
Plan) and no further claims may thereafter be made against HIG by any person on
account of the Intercompany Reinsurance Agreements or the Assumed Claims (as
defined in the Plan).
8. Tax Allocation Agreement. The Tax Allocation Agreement
shall terminate as to the HIG Group at 11:59 p.m. on the day following the
Payment Date, but shall remain in full force and effect for all periods prior
thereto, and HEI shall include the HIG Group in HEI's consolidated federal tax
returns through the day following the Payment Date; provided, however, that HIG
will indemnify HEI against, and, upon written demand by HEI, pay to HEI on or
before the date such taxes (including estimated taxes) are to be paid by HEI,
any taxes paid by HEI under the Tax Allocation Agreement on account of taxable
income from insurance and investment operations in excess of $4 million earned
by HIG during the period January 1, 1994 through and including the day
following the Payment Date. Any such payment due by HIG to HEI shall be paid
in full, without offset or diminution of any type, and such payment shall be a
condition precedent to HEI's obligation to include HIG in HEI's consolidated
tax group for the period from January 1, 1994 through the day following the
Payment Date. The HIG Group and Takayama (as Rehabilitator of HIG and
Liquidator of UNICO and
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HUI) will cooperate with HEI and provide such documents and other information
and take such steps as HEI may reasonably request in order to permit HEI to
prepare and file for the HEI consolidating group, in a timely manner, all
returns and information reports that may be required under federal tax laws,
rules and regulations.
9. Cooperation in Subsequent Litigation. In the event any
third party shall bring suit or otherwise assert a claim against any HEI-Group
Released Party or any Takayama-Group Released Party arising out of or related
to the general subject matters covered by the releases set forth in said
paragraphs 3 and 4, and/or arising out of or related to the settlement effected
hereby, Takayama, HIG, UNICO, HUI, HIGA, HEI and HEIDI, at their own expense,
agree that they will provide reasonable cooperation in the defense of such suit
or claim. Such cooperation shall include, but not be limited to, making
available documents as freely as would be the case if HEIDI continued to own
the HIG Group (with the exception of documents which constitute the work
product or privileged communications of counsel or the proprietary information
of HIG relating to the period after initiation of the Rehabilitation
Proceedings); making witnesses and potential witnesses available for
interviews, depositions and trial; and providing such other assistance as may
reasonably be requested. Nothing in this paragraph shall be construed to limit
the ability of any party
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hereto to obtain documents or other information through any lawful process.
10. Recoupment of HIGA Assessments. Prior to January 1, 1995,
no member of HIGA shall recoup any assessments imposed by HIGA related to the
insolvency of the HIG Group; provided, however, that this provision shall not
constitute or be construed as a waiver by HIGA of its right to make assessments
against its member insurers.
11. Claims Under HIG Policies. Claims filed by HEI and/or any
of its affiliates under the HIG Policies shall be treated by Takayama (as
Rehabilitator and/or Liquidator), HIG, UNICO, HUI and HIGA without regard to
the claimants' affiliation with the HIG Group and in the same manner as the
claims of all other similarly situated insureds of the HIG Group.
12. Option to Assume Outstanding Workers' Compensation Claims.
For a period of six (6) months from the Payment Date, HEI (or its designee,
provided such designee is reasonably acceptable to Takayama) shall have an
option to assume the liability for the HIG Group's outstanding workers'
compensation claims. In the event HEI elects to exercise this option, HEI (or
its designee) is required to notify Takayama (as Liquidator) in writing within
the option period. The assumption of liability for the HIG Group's workers'
compensation claims by HEI shall be completed as soon as practicable after such
notice is provided, at which time Takayama (as
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Liquidator) shall concurrently pay (or cause to be paid) by wire transfer in
same-day funds to HEI (or its designee) the amount of the workers' compensation
reserves as valued by the HIG Group in its most recent statutory financial
statements adjusted to the date of assumption. The reserves shall include only
case reserves, reserves for losses incurred but not reported, allocated loss
adjustment expenses, and 50% of the pro rata share of unallocated loss
adjustment expenses. In addition, Takayama, HIG, UNICO, HUI and HIGA (as
appropriate) shall assign (and shall cooperate as reasonably necessary to
obtain all necessary consents to such assignments) to HEI (or its designee),
without recourse, all rights accruing after such assumption of liability (a) in
all retrospective rated workers' compensation policies, so that HEI (or its
designee), without recourse, may pursue recovery from insureds for any future
adverse developments and (b) in all applicable policies providing reinsurance
with respect to the assumed workers' compensation liabilities. In the event
HEI (or its designee) is unable to obtain any such consent, it may elect either
to proceed or not to proceed with the proposed assumption, but shall have no
recourse against HIG other than electing not to proceed. In the event HEI or
its designee exercises its option under this paragraph 12, HEI (or its
designee, if such designee's indemnity is acceptable to Takayama in her sole
discretion), shall agree to indemnify, defend and hold harmless Takayama (as
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Rehabilitator and Liquidator), HIG, UNICO, HUI and HIGA from and after the date
of assumption with respect to any claims brought by reason of or arising out of
or related to the assumed claims; provided, however, that this hold harmless
agreement shall not inure to the benefit of any third party or operate in any
way to revive claims otherwise barred.
13. Covenants Not to Sue. Each Takayama-Group Releasing Party
and each HEI-Group Releasing Party covenants and agrees never to commence,
voluntarily assist in any way, prosecute, or cause, permit or advise to be
commenced or prosecuted against any person released pursuant to paragraph 3 and
4 hereof, respectively, any demand, claim, action or proceeding based in whole
or in part upon any of the matters so released; provided, however, that this
covenant shall not prohibit any party hereto from undertaking (a) any action,
including the maintenance of legal proceedings, to enforce the terms of this
Settlement Agreement or to undertake any actions against any person with
respect to claims not released hereby, or (b) any action required by court
order or judicial process.
As heretofore stated in paragraph 3 hereof, it is expressly
understood that nothing in this Settlement Agreement shall operate to release
or abrogate in any fashion the powers or rights of Takayama as Insurance
Commissioner to regulate the business of insurance in the State of Hawaii.
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14. Advice of Counsel; Understanding of Settlement Agreement.
Each of the parties hereto represents and agrees that it, she or he (as the
case may be) has discussed fully all aspects of this Settlement Agreement with
its, her or his respective attorneys, that each has carefully read and fully
understands all of the provisions of this Settlement Agreement and that each is
voluntarily entering into this Settlement Agreement.
15. No Reliance on Representations. Each of the parties
hereto represents and acknowledges that in executing this Settlement Agreement
it, she or he (as the case may be) does not rely and has not relied upon any
representation or statement not set forth herein made by any other party hereto
or by any of the respective directors, officers, employees, agents,
representatives or attorneys of any other party hereto with regard to the
subject matter, basis, or effect of this Settlement Agreement or otherwise.
16. Settlement Not Affected if Facts Change. The parties
fully understand that, if the facts with respect to which this Settlement
Agreement is executed are found hereafter to be different from the facts now
believed to be true, this Settlement Agreement shall remain effective
notwithstanding such difference in facts and the parties expressly agree,
accept and assume the risk of such possible difference in facts.
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17. Due Authority; Each Party Responsible for its Own
Attorneys' Fees. Each party hereto represents and warrants that, as of the
date of the execution of this Settlement Agreement, such party has the sole
right and authority to execute this Settlement Agreement on its behalf and on
behalf of the persons and entities represented by each party as set forth in
paragraphs 3 and 4 hereof, that the person executing this Settlement Agreement
on behalf of an entity is duly authorized and empowered to execute and deliver
this Settlement Agreement on its behalf, and that such party has not sold,
assigned, transferred, conveyed, or otherwise disposed of any claim or demand
relating to any rights released or surrendered by virtue of this Settlement
Agreement. The parties agree that they are each responsible for their own
attorneys' fees and costs, and each agrees that it will not seek from any other
person reimbursement for attorneys' fees and/or costs arising out of the
matters addressed in this Settlement Agreement, except that HEI agrees to pay
(or cause its insurers to pay) the reasonable fees and costs of attorneys for
the Individual Defendants and HEI and the Individual Defendants reserve the
right to seek recovery of their attorneys' fees and costs from their insurers.
18. No Rules of Construction Against Any Party. The parties
hereto participated jointly in the negotiation and preparation of this
Settlement Agreement, and each party has
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had the opportunity to obtain the advice of legal counsel and to review,
comment upon, and redraft this Settlement Agreement. Accordingly, it is agreed
that no rule of construction shall apply against any party or in favor of any
party. This Settlement Agreement shall be construed as if the parties jointly
prepared this Settlement Agreement, and any uncertainty or ambiguity shall not
be interpreted against any one party and in favor of the other.
19. Confidentiality. This Settlement Agreement and any
information furnished pursuant hereto is confidential and shall be held in
strict confidence by each of the parties hereto up to and including the time,
determined by the mutual agreement of Takayama and HEI, that a copy hereof is
delivered to any third party, or at such other time as Takayama and HEI shall
agree. Whether or not the settlement contemplated hereby is concluded, the
parties hereto confirm and agree that all drafts of this Settlement Agreement,
and all memoranda, discussions and correspondence leading up to this Settlement
Agreement, are confidential, are protected under Rule 408 of the Hawaii Rules
of Evidence and shall be maintained in strict confidence by each of the parties
hereto and its respective agents, representatives and attorneys. In the event
the settlement contemplated by this Settlement Agreement is not consummated,
the parties hereto agree that, by this agreement and pursuant to Rule 408 of
the Hawaii Rules of Evidence, this
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Settlement Agreement shall not be admitted in evidence or referred to in any
way in any judicial or other proceeding. Each of the parties hereto agrees
promptly to notify all other parties hereto of the receipt of, and to resist by
all lawful means, any attempt to compel the production of any drafts of this
Settlement Agreement and/or of any memoranda or correspondence leading up to
this Settlement Agreement or relating to the subject matter hereof.
Notwithstanding the foregoing, HEI reserves the right to make such public or
limited disclosures of information pertaining to this settlement and the terms
hereof, and at such times, as in its judgment are necessary or appropriate to
comply with (a) disclosure and related requirements applicable to corporations
whose securities are traded publicly and/or (b) the provisions of agreements to
which it is a party, and HEI, HEIDI and the Individual Defendants may make such
use of the Settlement Agreement and such other disclosures concerning matters
leading up to it as may be necessary in any proceedings against their insurers
as contemplated under paragraph 21 hereof. Furthermore, HIG reserves the right
to make such public or limited disclosures of information pertaining to this
settlement and the terms hereof as in its judgment are necessary or appropriate
to market HIG to prospective purchasers or investors. Insofar as this
confidentiality provision involves Takayama in her capacity as Insurance
Commissioner, it shall be construed in accordance with Chapter 92F of the
Hawaii Revised Statutes.
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20. Exchange of Information with Insurers. Whether or not the
settlement contemplated hereunder is consummated, Takayama, HIG, UNICO, HUI and
HIGA agree that they will not attempt to discover any documents or information
exchanged between HEI, HEIDI, the Individual Defendants and/or any of their
directors, officers, employees, agents, attorneys or other representatives and
their insurers relating to analysis of insurance coverage issues and/or any
claims or defenses pertinent to the subject matter of the Takayama Suit and/or
any of their respective litigation strategies; provided, however, that this
provision shall not operate to prevent the discovery of otherwise discoverable
pre-existing documents or information pursuant to a discovery request that does
not, in effect, call for production of documents identified by reference to
their selection for delivery to such insurers.
21. Reservation of Rights and Assignment of Claims Against
Liability Insurers. It is expressly understood and agreed by the parties
hereto that this Settlement Agreement is not intended to waive or release, and
the parties hereto do not hereby waive or release, any rights, claims or causes
of action any of them have, had, or may have against (a) any insurer which at
any time has provided director and officer liability insurance, comprehensive
general liability insurance, professional errors and omissions insurance or any
other type of insurance which may obligate it to respond to the claims
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asserted or that might have been asserted in the Takayama Suit and/or (b) any
company owned in whole or in part by any such insurer or affiliated with any
such insurer, all of which rights, claims and causes of action are hereby
expressly reserved. Takayama, the HIG Group and HIGA hereby (a) assign to HEI
any and all rights, claims and causes of action which they may have arising
under the above-described insurance policies, (b) covenant to cooperate with
HEI, in the same manner as described in paragraph 9 hereof, in any proceeding
in which HEI seeks to enforce any such rights, claims and causes of action and
(c) agree to execute such further documents as may be necessary to permit HEI
to enforce or resolve such claims, including an appropriate release thereof in
favor of such insurers.
22. Discontinuance of All Affiliation References. As soon as
practicable after the date hereof, and in any event not later than three (3)
business days after the Rehabilitation Approval Date, Takayama, HIG, UNICO, HUI
and HIGA, and their respective directors, officers, agents, employees,
attorneys and representatives, shall (at no expense to HEI, HEIDI and/or the
Individual Defendants) cease making any further reference to HEI, HEIDI, the
Individual Defendants or any of their affiliates as being affiliated with,
related to or in any way connected with HIG, UNICO or HUI, or any of their
predecessors or successors, including without limitation (a) discontinuing
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all use of the HEI logo and name, (b) removing and destroying all signs that
make any reference to HEI, HEIDI or any of their affiliates and (c) destroying
all letterhead, brochures, envelopes, insurance policy forms, note pads and
documents and/or stationery of any other kind which names or makes reference to
HEI, HEIDI, the Individual Defendants and/or any of their affiliates.
23. Return of Documents. On the Payment Date, or at such
other time as the parties shall agree, Takayama, HIG, UNICO, HUI and HIGA, and
their respective counsel, shall deliver to counsel for the party producing the
same, without retaining any copies thereof, all documents (and all copies
thereof) which were produced in the Takayama Suit by HEI, HEIDI and/or each of
the Individual Defendants.
24. Modifications and Amendments. This Settlement Agreement
may be modified or amended only by a writing signed by each of the parties
hereto, or their successors in interest.
25. Governing Law. This Settlement Agreement shall be
governed by and construed in accordance with the laws of the State of Hawaii.
26. Other Documents; Financial Statements. Each of the
parties hereto agrees to execute and deliver such other documents and
instruments as the other parties hereto may reasonably request in order to
carry out and effectuate the
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purposes and intent of this Settlement Agreement. By June 30, 1994, HIG shall
prepare and provide to HEI the consolidated tax balance sheet and related
statements of income and notes, together with supporting consolidating
financial information ("Consolidated Financial Statements"), as of and for the
year ended December 31, 1993 for HIG, UNICO, HUI and other HIG subsidiaries,
together with a review report prepared by HIG's independent auditor.
Consolidated Financial Statements for the period from January 1, 1994 up to and
including the day following the Payment Date shall also be prepared by HIG and
provided to HEI within 180 days after the Payment Date. All such Consolidated
Financial Statements will be prepared in accordance with the income tax basis
of accounting and in a manner consistent with the provisions of the Plan, past
practices and the terms of this Settlement Agreement, and all such Consolidated
Financial Statements, as well as any financial statements prepared while HIG is
within the Rehabilitator's control and which are intended to be filed with any
public agency covering HIG's continuing operations that includes any period
prior to the second day following the Payment Date, will be subject to review
and comment by HEI prior to issuance.
27. Entire Agreement. This Settlement Agreement sets forth
the entire agreement between the parties hereto and fully supersedes any and
all prior agreements, promises, representations, or inducements, no matter what
its or their form,
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concerning the subject matter hereof, except that (a) all prior agreements
pertaining to the confidentiality of settlement discussions shall remain in
full force and effect, and (b) this Settlement Agreement shall not modify or
supersede any indemnity or other agreements that the HEI-Group Released Parties
may have among themselves. No promises or agreements made contemporaneously or
subsequent to the execution of this Settlement Agreement by the parties hereto
shall be binding unless reduced to writing and signed by the parties or their
authorized representatives.
28. Counterparts. This Settlement Agreement may be executed
in counterparts, but shall be effective only after it has been signed on behalf
of each and all of the parties listed below. Facsimile signatures shall be
acceptable so long as original signatures are substituted as soon as reasonably
possible.
IN WITNESS WHEREOF, each of the parties hereto has personally
executed this Agreement or has caused its duly authorized officer to execute
this Agreement.
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PLEASE READ CAREFULLY. THIS SETTLEMENT AGREEMENT AND GENERAL RELEASE INCLUDES
A GENERAL RELEASE OF KNOWN AND UNKNOWN CLAIMS.
Approved as to Form: LINDA CHU TAKAYAMA, as
ROBERT A. MARKS, ATTORNEY Insurance Commissioner for
GENERAL OF THE STATE the State of Hawaii
OF HAWAII
By /s/ Rodney J. Tam /s/ Linda Chu Takayama
---------------------------- ----------------------------
John W. Anderson, Esq.
David A. Webber, Esq.
Rodney J. Tam, Esq.
Attorneys for Linda Chu
Takayama, as Insurance
Commissioner for the State
of Hawaii
Approved as to Form: LINDA CHU TAKAYAMA, as
MCCORRISTON MIHO MILLER Rehabilitator of The Hawaiian
MUKAI Insurance & Guaranty Company,
Limited, and as Liquidator of
United National Insurance
By /s/ William McCorriston Company, Limited and
---------------------------- Hawaiian Underwriters
Attorneys for Linda Chu Insurance Co., Ltd.
Takayama, as Rehabilitator
of The Hawaiian Insurance &
Guaranty Company, Limited, /s/ Linda Chu Takayama
and as Liquidator of ----------------------------
United National Insurance
Company, Limited and
Hawaiian Underwriters
Insurance Co., Ltd.
SETTLEMENT AGREEMENT AND GENERAL RELEASE
----------------------------------------
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Approved as to Form: THE HAWAIIAN INSURANCE &
MCCORRISTON MIHO MILLER GUARANTY COMPANY, LIMITED
MUKAI
By /s/ R. H. Whitehead
By /s/ William McCorriston ----------------------------
---------------------------- Its President
Attorneys for The Hawaiian
Insurance & Guaranty
Company, Limited; Hawaiian By /s/ Ann T. Nakagawa
Underwriters Insurance Co., ----------------------------
Ltd.; and United National Its Asst. Vice President
Insurance Company, Limited
HAWAIIAN UNDERWRITERS INSURANCE
CO., LTD.
Approved as to Form:
MATSUI CHUNG & SUMIDA By /s/ Ann T. Nakagawa
----------------------------
Its Controller
By /s/ Clyde W. Matsui
----------------------------
Attorneys for Hawaii By /s/ Doris Ohara
Insurance Guaranty ----------------------------
Association Its Vice President
UNITED NATIONAL INSURANCE
COMPANY, LIMITED
By /s/ Ann T. Nakagawa
----------------------------
Its Controller
By /s/ Doris Ohara
----------------------------
Its Vice President
HAWAII INSURANCE GUARANTY
ASSOCIATION
By /s/ Milton Tanora
----------------------------
Its Chairman
By /s/ Blake Obata
----------------------------
Its Administrator
SETTLEMENT AGREEMENT AND GENERAL RELEASE
----------------------------------------
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Approved as to Form:
GOODSILL ANDERSON QUINN
& STIFEL
By /s/ David J. Reber HAWAIIAN ELECTRIC
---------------------------- INDUSTRIES, INC.
Attorneys for Hawaiian
Electric Industries, Inc.
By /s/ Robert F. Clarke
----------------------------
Approved as to Form: Its President
FUJIYAMA DUFFY & FUJIYAMA
By /s/ Constance H. Lau
By /s/ Glen K. Sato ----------------------------
---------------------------- Its Treasurer
Attorneys for
HEI Diversified, Inc.
HEI DIVERSIFIED, INC.
Approved as to Form:
CADES SCHUTTE FLEMING By /s/ Edward J. Blackburn
& WRIGHT ----------------------------
Its President
By /s/ Jeffrey S. Portnoy
---------------------------- By /s/ Robert F. Mougeot
Attorneys for Individual ----------------------------
Defendants Robert F. Its Financial Vice President
Clarke, Edward J.
Blackburn and Robert F.
Mougeot INDIVIDUAL DEFENDANTS
/s/ Robert F. Clarke
------------------------------
ROBERT F. CLARKE
/s/ Edward J. Blackburn
------------------------------
EDWARD J. BLACKBURN
/s/ Robert F. Mougeot
------------------------------
ROBERT F. MOUGEOT
SETTLEMENT AGREEMENT AND GENERAL RELEASE
----------------------------------------
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Approved as to Form: INDIVIDUAL DEFENDANTS
REINWALD O'CONNOR MARRACK
HOSKINS & PLAYDON
/s/ Thomas S. Adams
------------------------------
By /s/ Mario A. Roberti THOMAS S. ADAMS
----------------------------
Attorneys for Individual
Defendants Thomas S. /s/ Gary L. Kirby
Adams, Gary L. Kirby, ------------------------------
David L. Ward and GARY L. KIRBY
Neal Kunde
/s/ David L. Ward
------------------------------
DAVID L. WARD
/s/ Neal Kunde
------------------------------
NEAL KUNDE
SETTLEMENT AGREEMENT AND GENERAL RELEASE
----------------------------------------
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