Exhibit 10.2
SETTLEMENT AGREEMENT AND CLAIM RELEASE
THIS SETTLEMENT AGREEMENT AND CLAIM RELEASE is made as of this 3rd day
of October, 1997, by and between SBM Company (now known as 1150 Liquidating
Corporation) (hereinafter referred to as "SBM"), Nutmeg Insurance Company
(hereinafter referred to as "Nutmeg"), and Pacific Insurance Company
(hereinafter referred to as "Pacific"), as follows:
WITNESSETH
WHEREAS, Nutmeg issued Corporate Fiduciary Liability Insurance Policy
No. QV0000011 to SBM for the period from July 26, 1994 to July 26, 1995,
specifying limits of liability of $3,000,000 per claim and in the aggregate for
all claims first made against the insureds during the policy period, subject to
a $5,000 deductible per claim (hereinafter referred to as the "Nutmeg Policy");
and
WHEREAS, SBM sponsored two employee retirement plans, being the SBM
Company Thrift Plan and the SBM Company Profit Sharing Stock Plan (hereinafter
referred to collectively as the "Plans"), with Firstar Trust Company of
Minnesota (hereinafter referred to as "Firstar") acting as trustee of the two
Plans; and
WHEREAS, SBM and Firstar were parties to a Stock Agreement dated
September 1, 1993, which allowed Firstar to "put" shares of SBM stock held by
the Plans back to SBM at a price established by a formula in the Stock
Agreement; and
WHEREAS, on January 30, 1995, Firstar attempted to "put" all of the SBM
stock held by the Plans back to SBM at a specified price, which put and price
SBM disputed; and
WHEREAS, on or about February 28, 1995, SBM commenced a civil action
for declaratory judgment with respect to the issue of the "put" of the SBM stock
held by the Plans entitled SBM COMPANY V. FIRSTAR TRUST COMPANY OF MINNESOTA, ET
AL., venued in Hennepin County District Court for the State of Minnesota as File
No. CT-95-003703 (hereinafter referred to as the "Firstar Litigation"); and
WHEREAS, on March 27, 1995, Firstar filed an Answer and Counterclaim
against SBM in the Firstar Litigation; the Counterclaim alleged breach of the
terms of the Stock Agreement, estoppel, breach of fiduciary duty under the
Employee Retirement Income Security Act of 1974 (hereinafter referred to as
"ERISA") and "other breach of fiduciary duty" (hereinafter referred to as the
"Counterclaim"); and
WHEREAS, the Counterclaim was reported to Nutmeg with a request for
coverage as to same under the Nutmeg Policy; and
WHEREAS, Nutmeg denied coverage under the Nutmeg Policy with respect to
the Counterclaim; and
WHEREAS, Pacific issued Corporate Fiduciary Liability Insurance Policy
No. TV0000170 to SBM (hereinafter referred to as "Pacific Policy") which
replaced the Nutmeg Policy at the end of its policy period; and
WHEREAS, by letter dated June 5, 1996, the United States Department of
Labor (hereinafter referred to as "DOL") notified SBM of an investigation
relating to the Plans (EIN/PN: 00-0000000; Case No. 60-95129); and by letter
dated September 23, 1996, the United States Internal Revenue Service
(hereinafter referred to as "IRS") notified SBM of an investigation relating to
the Plans (EP 7105) (collectively referred to herein as the "DOL and IRS
Investigations"); and
WHEREAS, in 1996 SBM made claims for coverage upon Nutmeg and Pacific
with respect to claims arising out of the DOL and IRS Investigations; claims
which were denied by Nutmeg and Pacific; and
WHEREAS, SBM has negotiated a settlement of the Firstar Litigation
including the Counterclaim, which settlement will become effective on November
21, 1997 in the event no appeal is taken from the Court's judgment approving the
settlement in the Firstar Litigation by that date (hereinafter referred to as
the "Judgment"); and
WHEREAS, in conjunction with the settlement of the Firstar Litigation,
both the DOL and the IRS concluded their respective investigations and issued
letters of case closing stating that no further enforcement action would be
taken; and
WHEREAS, SBM, Nutmeg and Pacific have, by virtue of discussions and
negotiations, agreed to resolve their differences, without waiving their
relative positions, but in the interests of avoiding time-consuming and
expensive litigation;
NOW THEREFORE, it is mutually understood and agreed by and between the
parties to this Settlement Agreement and Claim Release as follows:
1. This Settlement Agreement and Claim Release shall be unenforceable
and of no force and effect until such time as the time for filing an appeal from
the Judgment in the Firstar Litigation has expired (namely, November 21, 1997)
and no appeal has been filed within that time. Upon the expiration of that time
period with no appeal having been filed, this Settlement Agreement and Claim
Release shall become legally binding upon and enforceable against the parties
hereto.
2. Nutmeg and Pacific agree jointly, without waiving, modifying,
altering, or changing in any way their rights under the terms, covenants,
conditions, exclusions, provisions, additions and endorsements to the Nutmeg
Policy and the Pacific Policy to pay to SBM the total sum of Three Hundred Forty
Thousand Dollars ($340,000.00), in full and complete satisfaction of any and all
obligations Nutmeg and Pacific shall or may have under or pursuant to the Nutmeg
Policy and the Pacific Policy with respect to the Counterclaim or any claims
arising out of or related to the Counterclaim, including but not limited to any
direct claims, cross-claims or third-party claims, and the DOL and IRS
Investigations. The $340,000.00 payment shall be made at the time the settlement
payments in the Firstar Litigation are due; that is, assuming the Judgment is
not appealed by November 21, 1997, payment of the $340,000.00 shall be made no
later than December 5, 1997.
3. In consideration of the payment described in numbered Paragraph 2
above, and for other good and valuable consideration, SBM, for itself, its
partners, shareholders,
principals, attorneys and their heirs, executors, administrators, successors and
assigns, hereby releases, acquits and discharges Nutmeg and Pacific and their
partners, principals, shareholders, directors, officers, attorneys, employees
and other insurers, agents, representatives, parents, subsidiaries, affiliates,
divisions, predecessors or successors, partnerships or corporations, heirs,
executors, administrators and assigns, from any and all liability, actions,
causes of action, suits, debts, dues, sums of money, accounts, reckonings,
bonds, bills, specialties, covenants, contracts, controversies, agreements,
promises, variances, trespasses, damages, judgments, extents, executions, claims
and demands whatsoever, in law, admiralty, or equity arising out of, or in any
way connected with or related to coverage under the Nutmeg Policy and/or the
Pacific Policy with respect to the Counterclaim, including, but not limited to,
all legal fees and costs that the parties may have incurred through the
conclusion of all proceedings in, relating to, or arising from the Counterclaim,
and the DOL and IRS Investigations.
4. For good and valuable consideration, Nutmeg and Pacific, and each of
them, their respective insurers, agents, representatives, parents, subsidiaries,
affiliates, divisions, predecessors or successors, partnerships or corporations,
heirs, executors, administrators and assigns, attorneys and their heirs,
executors, administrators, successors and assigns, hereby release, acquit and
discharge SBM and its partners, principals, shareholders, directors, officers,
attorneys, employees and other insurers, agents, representatives, parents,
subsidiaries, affiliates, divisions, predecessors or successors, partnerships or
corporations, heirs, executors, administrators and assigns, from any and all
liability, actions, causes of
action, suits, debts, dues, sums of money, accounts, reckonings, bonds, bills,
specialties, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, judgments, extents, executions, claims and
demands whatsoever, in law, admiralty, or equity arising out of, or in any way
connected with or related to coverage under the Nutmeg Policy and/or the Pacific
Policy with respect to the Counterclaim, including, but not limited to, all
legal fees and costs that the parties may have incurred through the conclusion
of all proceedings in, relating to, or arising from the Counterclaim, and the
DOL and IRS Investigations.
5. This Settlement Agreement and Claim Release is intended to and does
finally and fully terminate and dispose of all claims and causes of action which
have or may be asserted by SBM, Nutmeg and Pacific, and each of them, and anyone
acting through, for, or on behalf of any one of them, as against the others with
respect to the Counterclaim, including all legal fees and costs that the party
may have incurred therein, or in any proceeding for, based upon, or arising out
of the Counterclaim. No rights or claims or interest asserted or which may have
been asserted by the parties against the others with respect to the Counterclaim
shall survive the execution of this Settlement Agreement and Claim Release. All
such rights, claims, causes of action and interest are merged into this
Settlement Agreement and Claim Release.
6. It is expressly understood and agreed to among the parties that
nothing in this Settlement Agreement and Claim Release shall preclude or limit
SBM or any other insured under the Nutmeg Policy and/or Pacific Policy from
seeking further coverage from Nutmeg
and/or Pacific in the event the DOL and/or the IRS reverse their position and
make claims against SBM or any other insured upon or relating to the allegations
they have previously made against SBM. But any coverage for such claims shall
only relate to any sums incurred after the reversal of position by the DOL
and/or IRS. Similarly, Nutmeg and Pacific shall retain the right to assert all
appropriate and applicable coverage defenses, insofar as this Settlement
Agreement and Claim Release will not waive such rights.
7. This Settlement Agreement and Claim Release represents the entire
understanding between the parties with respect to the Counterclaim. This
Settlement Agreement and Claim Release can only be modified by a writing signed
by all parties hereto and the provisions contained herein cannot be orally
waived or modified.
8. This Settlement Agreement and Claim Release shall be governed by,
and construed in accordance with, the laws of the State of Minnesota.
9. This Settlement Agreement and Claim Release shall inure to the
benefit of, and shall be binding upon, each of the parties and their respective
directors, officers, parents, subsidiaries, affiliates, attorneys, agents,
employees, representatives, successors, heirs and assigns.
10. The parties hereto represent, warrant and covenant that they have
read this Settlement Agreement and Claim Release, that they have consulted with
their respective attorneys concerning its contents and consequences and that the
Settlement Agreement and Claim Release has been executed voluntarily by them.
11. This Settlement Agreement and Claim Release may be executed in two
or more counterparts and in both original form and one or more copies, each of
which shall be deemed an original but all of which shall constitute one and the
same written instrument.
12. The parties who hereunto affix their signatures expressly state
that they are authorized to enter into this Settlement Agreement and Claim
Release on behalf of their respective parties to the Agreement.
IN WITNESS WHEREOF, the parties have hereunto set their signatures.
SBM COMPANY, NOW KNOWN AS
1150 LIQUIDATING CORPORATION
By: /s/ Xxxxxxx X. Xxxx
-----------------------------
An Authorized Representative
NUTMEG INSURANCE COMPANY
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------
An Authorized Representative
PACIFIC INSURANCE COMPANY
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------
An Authorized Representative
