Exhibit 10.3
Settlement Agreement
This Settlement Agreement, dated as of December 1, 1999 (this
"Agreement"), among Bank One, NA, formerly known as The First National Bank of
Chicago "Bank One"), ARM Financial Group, Inc., a Delaware corporation ("ARM"),
and Integrity Life Insurance Company, a stock insurance company domiciled in
Ohio ("Integrity").
The Western and Southern Life Insurance Company, a mutual insurance
company domiciled in Ohio ("W&S"), and ARM are entering into a Letter of Intent,
dated December 1, 1999 (the "Letter of Intent"), with respect to a proposed sale
by Integrity Holdings, Inc., a Delaware corporation and wholly-owned subsidiary
of ARM, of Integrity and its wholly-owned subsidiary, National Integrity Life
Insurance Company ("National Integrity"), to W&S (the "Proposed Transaction").
To facilitate the Proposed Transaction, GenAmerica Corporation and
General American Life Insurance Company (collectively, "GenAm") have agreed
that, if the closing of the Proposed Transaction (the "Closing") occurs on or
before March 31, 2000 and ARM contributes $15 million to the capital of
Integrity on or before Closing, then at Closing the promissory note issued to
GenAm by ARM in the principal amount of $38 million will be cancelled, GenAm
will contribute $2 million in cash to Integrity and GenAm will release and
settle its claims against Integrity and National Integrity relating to certain
swaps owed to GenAm. As part of such settlement, The Equitable Life Assurance
Society of the United States ("Equitable") has agreed to contribute $2 million
to Integrity, in exchange for indemnities from W&S in connection with
assignments of certain structured settlement annuities by Integrity and National
Integrity. At Closing, as part of such settlement, GenAm and Equitable will
become entitled to share in certain proceeds of the Purchase Price Escrow
described in the Letter of Intent, after payments to W&S and of certain other
transaction fees and expenses, but before payments to ARM.
In addition, pursuant to a confidential settlement agreement with
another former institutional client of ARM, the principal owed by Integrity to
such client thereunder shall be reduced from $16.4 million to $12 million if the
Closing occurs on or before March 31, 2000.
The Proposed Transaction is subject to the execution of a definitive
purchase agreement between the parties (the "Definitive Purchase Agreement")
and, among other conditions, the filing by ARM of a voluntary petition for
relief under chapter 11 of Title 11 of the United States Code (the "Bankruptcy
Code") in the United States Bankruptcy Court for the District of Delaware (the
"Bankruptcy
Court") and the approval by the Bankruptcy Court of the Proposed Transaction
under sections 363 and 365 of the Bankruptcy Code.
Bank One, International Securization Corporation, a bankruptcy-remote
Delaware corporation ("ISC") and Integrity are parties, among others, to a
Termination and Sale Agreement, dated August 27, 1999 (the "Termination
Agreement").
This Agreement is being entered into by the parties in order to induce
ARM and W&S to enter into the Definitive Purchase Agreement and to complete the
Proposed Transaction. The consummation of certain transactions hereunder shall
be subject to satisfaction of the following conditions (the "Conditions"): (a)
the approval by the Bankruptcy Court of the Proposed Transaction under sections
363 and 365 of the Bankruptcy Code, (b) the approval of the Bankruptcy Court of
any such agreements as shall involve ARM including, without limitation, the
releases described in Section 2 below, (c) the approval by appropriate insurance
regulators in the States of Ohio, Missouri and New York, (d) delivery by the
Ohio Department of Insurance of the release and written confirmation required
under Section 3 hereof and (e) satisfactory completion by W&S of its due
diligence investigation and consummation of the Closing on or before March 31,
2000.
Accordingly, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Payments. Subject to satisfaction of the Conditions, at Closing,
Integrity shall pay to Bank One in full satisfaction of Integrity's obligations
to pay the Deferred Amount (as defined in Section 1 of the Termination
Agreement) an amount equal to six million dollars ($6,000,000), together with
interest due under such Section 1 as if the amount due at all times had been six
million dollars ($6,000,000).
2. Releases. Subject to satisfaction of the Conditions, at Closing,
ARM, Integrity Holdings, Inc., and Integrity will release and discharge Bank
One, ISC and their respective affiliates and assigns, and Bank One and ISC will
release and discharge ARM, Integrity and their respective affiliates and
assigns, with respect to all claims, obligations and liabilities of any kind
whatsoever, whether arising under the Bankruptcy Code or otherwise, including,
without limitation, any matter arising under, or relating in any way to, the
Termination Agreement and any of the agreements or transactions entered into
pursuant to the Termination Agreement, except for obligations arising under this
Agreement. Each such release shall be in form and substance satisfactory to Bank
One and ARM.
3. Ohio Department of Insurance. The Closing shall be subject to the
State of Ohio Department of Insurance releasing Integrity from the Supervision
of the Superintendent and the provision by the State of Ohio
Department of Insurance of written confirmation that, upon Closing, it is aware
of no basis upon which to initiate any receivership proceeding and no statutory
basis upon which a receiver of Integrity, if any, could properly initiate any
preference or fraudulent transfer action with respect to the Termination
Agreement.
4. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original and all such counterparts shall together constitute but one and
the same instrument.
5. Entire Agreement. This Agreement constitutes the entire agreement
among the parties hereto relating to the matters set forth in Sections 1 through
8 hereof and there are no other agreements between the parties hereto, either
existing or contemplated, written or oral, with respect thereto.
6. Further Assurances. The parties hereby agree to execute promptly any
and all supplemental agreements, releases, affidavits, waivers and other
documents of any nature or kind which any other party hereto may reasonably
require in order to implement the provisions or objectives of this Agreement.
7. Amendment; Successors. This Agreement may not be amended, modified,
changed, discharged or terminated, except by an instrument in writing signed by
each of the parties hereto. This Agreement shall be binding and inure to the
benefit of successors and assigns of the parties. Notwithstanding anything to
the contrary herein, Bank One and ISC agree that the terms of this Agreement
shall remain binding on each of them if a third party submits a higher and
better offer for the assets included in the Proposed Transaction and an
Alternative Transaction (as defined in the Letter of Intent) is consummated with
such third party; provided that Equitable and GenAm have also agreed to remain
bound in such circumstances to the agreements referenced in the recitals above
and provided, further that the former institutional client of ARM remains bound
to the agreement referenced in the recitals above.
8. Governing Law. This Agreement shall be governed by the laws of the
State of Ohio applicable to contracts made and to be performed entirely within
such State.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
BANK ONE, NA (f/k/a The First
National Bank of Chicago)
By: /s/ Xxxxx X. Xxxxxxxx
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Name: Xxxxx X. Xxxxxxxx
Title: Senior Vice President
INTERNATIONAL SECURIZATION
CORPORATION
By: /s/ Xxxx X. Xxxxxx
------------------
Name: Xxxx X. Xxxxxx
Title: Authorized Signatory
ARM FINANCIAL GROUP, INC.
By: /s/ Xxxx X. Xxxxxxxx
--------------------
Name: Xxxx X. Xxxxxxxx
Title: President, Retail Bus Div.
INTEGRITY LIFE INSURANCE
COMPANY
By: /s/ Xxxx X. Xxxxxxxx
--------------------
Name: Xxxx X. Xxxxxxxx
Title: President
