EXHIBIT 2
SETTLEMENT AGREEMENT
This Settlement Agreement ("Agreement") is entered into by and between
Protection One Alarm Monitoring, Inc., as successor by merger to WestSec, Inc.
("WestSec") and NYLIFE Structured Asset Management Company, Ltd. ("SAMCO").
SAMCO and WestSec are "the Parties" to this agreement.
WHEREAS, on or about November 15, 1991, SAMCO and WestSec's predecessor,
Westinghouse Electric Corporation ("WEC"), entered into the Operational Services
Agreement ("OSA") pursuant to which WEC agreed, among other things, to perform
management and monitoring services for certain security alarm system contracts
owned by SAMCO.
WHEREAS, in 1992 and 1993, WEC, Westinghouse Security Systems, L.P.
("WSS") and SAMCO entered into a series of Account Purchase Agreements dated
July 15, 1992, September 16, 1992, November 19, 1992, December 12, 1992, and
June 18, 1993 (collectively, the "Purchase Agreements") which provided for the
sale of certain security alarm system contracts and related assets to SAMCO by
WEC and WSS.
WHEREAS, in connection with the purchase of the security alarm contracts
under the Purchase Agreements, SAMCO issued its Series A Notes due on February
15, 1998, its Series B Notes due on August 15, 1998, and its Series C Notes due
on August 15, 1999 (collectively, the "Notes").
WHEREAS, each series of Notes was secured by, among other things, security
alarm system contracts sold to SAMCO by WEC and WSS pursuant to the Purchase
Agreements (the "Contracts constituting the collateral securing such Notes" or
the "note holders' Lien").
WHEREAS, in or about December of 1996, WEC, WestSec and Western Resources,
Inc. ("WRI") entered into an Asset Purchase Agreement pursuant to which WestSec
and WRI purchased from WEC the business of managing, servicing and monitoring
security alarm systems.
WHEREAS, in connection with WEC's assignment to WestSec of WEC's rights,
title and interest in the OSA and Purchase Agreements, SAMCO, WEC, WestSec and
Westar Capital, Inc. ("Westar") entered into a Consent, Assignment, Assumption,
Amendment and Modification Agreement dated December 30, 1996 ("Consent
Agreement"), pursuant to which SAMCO consented to the assignment to WestSec of
the OSA and Purchase Agreements subject to the terms of the Consent Agreement.
WHEREAS, the Consent Agreement modified Section 9.1 of the OSA to require
WestSec or an affiliate of WestSec designated by it to "irrevocably purchase the
Contracts constituting the collateral securing [each series of] Notes."
WHEREAS, the Consent Agreement further provided that WestSec furnish SAMCO
with a letter of credit to secure its obligations under the OSA, the Consent
Agreement and the Purchase Agreements (the "Letter of Credit").
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WHEREAS, on or about February 15, 1998, SAMCO's Series A Notes matured,
which effectuated WestSec's obligation under the Consent Agreement to pay for
the Series A "Contracts constituting the collateral securing such Notes."
WHEREAS, on or about August 15, 1998, SAMCO's Series B Notes matured,
which triggered WestSec's obligation to pay for the Series B "Contracts
constituting the collateral securing such Notes."
WHEREAS, the Series C Notes are scheduled to mature on August 15, 1999, at
which time WestSec would be obligated to pay for the Series C "Contracts
constituting the collateral securing such Notes."
WHEREAS, a dispute has arisen between Westsec and SAMCO regarding, among
other things, the total number of the Contracts constituting the collateral
securing such Notes, the calculation of WestSec's performance bonus upon the
sale of the Contracts constituting the collateral securing such Notes, and the
fair market value of the Contracts constituting the collateral securing such
Notes
WHEREAS, on Xxxxx 0, 0000, XxxxXxx filed a petition against SAMCO in the
00xx Xxxxxxxx Xxxxxxxx Xxxxx xx Xxxxxx Xxxxxx, Xxxxx; Cause No. DV 98-01761-B
(the "Litigation"), setting forth claims for declaratory judgment, breach of
contract and attorneys' fees.
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WHEREAS, on March 27, 1998, SAMCO filed an answer in the Litigation,
setting forth a general denial, affirmative defenses and counterclaims against
WestSec for declaratory judgment, breach of contract and attorneys' fees.
WHEREAS, WestSec has purchased from SAMCO the contracts securing the
Series A and B Notes, through transactions that were partially disputed prior to
this settlement.
WHEREAS, bona fide disputes and controversies exist between WestSec and
SAMCO, both as to liability and the amount thereof.
WHEREAS, by reason of such disputes and controversies, the Parties desire
to compromise and settle all claims and causes of action of any kind between the
Parties.
In exchange for their promises, the Parties agree:
1. Payment of Purchase Amount and Transfer of Accounts.
a. On or before December 17, 1998, WestSec shall pay SAMCO Twenty-nine
million five hundred thousand dollars ($29.5 million) (the "Purchase Amount") by
delivering the Purchase Amount in immediately available funds in trust to Xxx
Xxxxxx, SAMCO's attorney of record in the Litigation.
b. Upon receipt of the Purchase Amount, Xxxxxx (on behalf of SAMCO) will
deliver to Xxxx Xxxxxx, WestSec's attorney of record in the Litigation, a copy
of the Accounts Purchase Agreement, Xxxx of Sale and Assumption Agreement
attached as Exhibit A, executed by SAMCO, whereby SAMCO transfers and assigns to
WestSec title to any and
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all security alarm monitoring accounts in which SAMCO claims an interest
("Accounts"), unencumbered except for the note holders' Lien.
x. Xxxxxx will deliver to Xxxxxx a copy of the document attached as
Exhibit A (including the Assumption Agreement), executed by WestSec, it being
acknowledged by the Parties that the note holders' Lien will not be released by
the note holders trustee until 91 days after SAMCO deposits the funds referred
to in paragraph 3(b).
2. Mutual Releases and Dismissal with Prejudice.
Effective upon the delivery of the Purchase Amount and executed conveyance
document referred to in paragraph 1 above, and except as to rights and duties
created by this Agreement:
a. SAMCO generally releases WestSec and its parent, successors,
predecessors, affiliates, and their legal representatives, officers, directors,
employees, stockholders, insurers, assigns, and attorneys (collectively, the
"WestSec Parties") from any and all claims SAMCO has or may now have, including
in particular but without limitation claims of breach of contract, declaratory
judgment and attorneys fees. This release is intended to be as broad as the law
allows. SAMCO further covenants and agrees to not directly or indirectly assist,
aid, abet, sponsor, continue, renew, commence or prosecute, join in or
participate as an adverse party or as an adverse witness (in either instance,
however, subject to court order, requirement of law or compulsory legal process)
in any suit or action at law or otherwise against the WestSec Parties directly
or indirectly.
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b. WestSec generally releases SAMCO and its parent, successors,
predecessors, affiliates, and their legal representatives, officers, directors,
employees, stockholders, insurers, assigns, and attorneys (collectively, the
"SAMCO Parties") from any and all claims WestSec has or may now have, including
in particular but without limitation claims of breach of contract, declaratory
judgment and attorneys fees. This release is intended to be as broad as the law
allows. WestSec further covenants and agrees to not directly or indirectly
assist, aid, abet, sponsor, continue, renew, commence or prosecute, join in or
participate as an adverse party or as an adverse witness (in either instance,
however, subject to court order, requirement of law or compulsory legal process)
in any suit or action at law or otherwise against the SAMCO Parties directly or
indirectly.
x. Xxxxxx will sign and Xxxxxx will sign and deliver to the court for
entry the Agreed Order of Dismissal with Prejudice attached as Exhibit B, which
taxes costs to the party incurring them.
3. Warranties by SAMCO.
a. SAMCO warrants that it is solvent and paying its debts as they come
due, that it will not file a voluntary petition in any bankruptcy proceeding,
and that it has not committed and will not commit any acts of bankruptcy that
could result in a third party filing an involuntary petition in a bankruptcy
proceeding.
b. SAMCO warrants that within one business day after it receives the
payment described in P. 1(a), it will pay the trustee for the note holders the
money (or an equivalent
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amount of U.S. Government securities) required to obtain a release of the note
holders' Lien on the Accounts, and that the trustee will be irrevocably
instructed not to disburse this money or the proceeds of the Government
securities to the note holders until it has executed a UCC-3 releasing the note
holders' Lien; provided that the trustee may make the required payments of
interest and principal on February 15, 1999 and May 15, 1999.
c. SAMCO warrants that within 96 days after it receives the payment
described in P. 1(a), it will mail or cause the trustee to mail to WestSec
appropriate forms UCC-3, fully executed, releasing the note holders' Lien on the
Accounts.
d. SAMCO warrants that it has obtained a complete release of SAMCO and
WestSec from BK Financial, Xxxxxx Xxxxxxxx, Capital Recovery, Inc. and/or Xxxxx
X. Day (collectively, the "Consultants"), as reflected by Exhibit C attached,
effective upon payment of the sum stated therein, which payment SAMCO warrants
that it will make within 3 business days of receipt from WestSec of the payment
described in paragraph 1.
e. In the event that SAMCO breaches any of these warranties, WestSec shall
be entitled to recover all damages caused by the breach.
4. Indemnification.
a. SAMCO agrees to indemnify, defend and hold harmless the WestSec Parties
against any claims by the Consultants. SAMCO also agrees to indemnify, defend
and hold harmless the Westsec Parties against any claims by the holders of the
Series A, Series B and Series C Notes.
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b. WestSec agrees to indemnify, defend and hold harmless the SAMCO Parties
against any claims by any of the customers whose security alarm contracts make
up the Accounts.
5. Merger Clause.
It is understood and agreed that this Agreement and its exhibits contain
the entire agreement between the Parties and supersede any and all prior
agreements, representations, arrangements or understandings between the Parties.
This Agreement cannot be changed or terminated orally. No other oral
understandings, representations, statements, promises or inducements in addition
to or contrary to the terms of this Agreement exist.
6. No Admission.
It is understood and agreed that the terms hereof are contractual and not
merely recitals. It is further understood and agreed that this Agreement is a
compromise of doubtful and disputed claims and that no payments made, releases
or other consideration given or anything contained herein shall be construed as
an admission by any party, all liability being expressly denied.
7. Confidentiality.
It is understood and agreed that the Parties and their attorneys shall
keep and maintain confidential all terms of this Agreement including the nature,
size and amount of consideration to be paid hereunder, and shall not voluntarily
disclose to any persons or entities outside the Parties and their attorneys any
of the terms of this Agreement, except for
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the purpose of enforcing this Agreement, the exhibits hereto, or any provisions
therein, and except as may be required by law, rule or regulation. However, it
shall not be a violation of this Agreement for representatives of the Parties
who are involved in negotiation, execution, and/or implementation of this
Agreement to disclose to any advisors, accountants, investors or any other
persons who reasonably need to know such information that the Litigation was
settled through a confidential agreement.
8. Warranty of Ownership, Non-Transfer & Non-Assignment of Claims.
It is expressly warranted by the Parties that they are the sole owners and
holders of all claims, actions and causes of action described in this Agreement
and that they have not sold, conveyed, assigned and/or transferred any of their
rights in or pertaining to such claims, actions and causes of action to any
person, including without limitation, natural persons, corporations,
partnerships, limited partnerships, joint ventures, sole proprietorships or
other business entities.
9. Governing Law.
This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Texas, and any disputes hereunder will
be brought in a State District Court in Dallas, Dallas County, Texas.
10. Acknowledgment That Agreement Is Voluntary.
The Parties acknowledge that they have carefully read and understand this
Agreement, including the attached exhibits referred to herein; that this
Agreement and the attached
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exhibits express the entire Agreement between the Parties; and that they have
executed this Agreement freely of their own accord and for good and valuable
consideration. Both parties make this agreement after obtaining advice of their
own counsel. Neither party is under any duress, coercion, or pressure to settle.
11. Severability Clause.
If any provision of this Agreement is or may be held by a court of
competent jurisdiction to be invalid, void, unenforceable, or in violation of
any laws, such provision may be judicially modified or reformed in such manner
as to be enforceable and the remaining provisions shall nevertheless survive and
continue in full force and effect without being impaired or invalidated in any
way.
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EXECUTED this 17th day of December, 1998.
PROTECTION ONE ALARM MONITORING, INC.
BY: /s/ Xxxx X. Xxxxx, EX.V.P.
------------------------------
NAME: Xxxx X. Xxxxx
TITLE: EX.V.P.
STATE OF TEXAS ss.
ss.
COUNTY OF DALLAS ss.
BEFORE ME, the undersigned authority, a Notary Public in and for said
County and State, on this day personally appeared Xxxx X. Xxxxx being by me
first duly sworn, who stated to me that he is the person and officer whose name
is subscribed to the foregoing Agreement and acknowledged to me that he executed
this Agreement as the act of WestSec, Inc., for the purposes and consideration
therein expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 17th day of December, 1998.
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XXXXXX XXXXX /s/ Xxxxxx Xxxxx
[SEAL] Notary Public, State of Texas ------------------------------
My Commission Expires Notary Public, State of Texas
JUNE 17, 2002
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NOTARY INSIGNIA:
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EXECUTED this 17th day of December, 1998.
NYLIFE STRUCTURED ASSET
MANAGEMENT COMPANY, LTD.
BY: /s/ Xxxxx X. Xxxxxxx
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NAME: Xxxxx X. Xxxxxxx
TITLE: President
STATE OF NEW YORK ss.
ss.
COUNTY OF NEW YORK ss.
BEFORE ME, the undersigned authority, a Notary Public in and for said
County and State, on this day personally appeared Xxxxx X. Xxxxxxx being by me
first duly sworn, who stated to me that he is the person and officer whose name
is subscribed to the foregoing Agreement and acknowledged to me that he executed
this Agreement as the act of NYLIFE Structured Asset Management Company, Ltd.,
for the purposes and consideration therein expressed, and in the capacity
therein stated.
GIVEN UNDER MY HAND AND SEAL OF OFFICE this 17th day of December, 1998.
/s/ Xxxxxx Xxxxxxx
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Notary Public, State of New York
NOTARY INSIGNIA: Xxxxxx Xxxxxxx
Notary Public, STATE OF NEW YORK
No. 00-0000000
Qualified in Kings County
Certificate Filed in New York County
Commission Expires April 30, 1999
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