EXHIBIT 10.40
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement and Mutual Release (together with all exhibits
and other attachments hereto)(the "Settlement Agreement") is made and entered
into as of June 7, 2002 by and among U.S.I. Holdings Corporation, a Delaware
corporation ("USI") and Royal Indemnity Company, a Delaware corporation
("Royal").
RECITALS
WHEREAS, USI and Royal entered into that certain Strategic Alliance
Agreement dated March 29, 2000 (the "Agreement");
WHEREAS, pursuant to letters dated March 31, 2000 and December 22, 2000,
from Xxxxxxx X. Xxxxx, Chairman and Chief Executive Officer of USI to Xxxx
Xxxxxxx, Executive Vice President of Royal (collectively, the "Letter
Agreement"), Royal and USI entered into an Agreement and that certain Xxxxxxxxx
claim;
WHEREAS, as of June 30, 2001, the Agreement terminated pursuant to a notice
of termination by Royal to USI dated April 23, 2001;
WHEREAS, Royal and USI disagree as to the meaning of the certain provisions
in the Agreement and the Letter Agreement;
WHEREAS, both USI and Royal desire to resolve and conclude their
differences with regard to the Agreement and the Letter Agreement;
WHEREAS, Royal and USI have deemed it advisable to execute this Settlement
Agreement, in which they resolve the outstanding matters between them with
respect to the Agreement and the Letter Agreement; and
WHEREAS, all capitalized terms used herein and not defined have meanings
used in the Agreement.
NOW, THEREFORE, for and in consideration of the mutual covenants and
conditions contained herein, the receipt and sufficiency of which are hereby
acknowledged and confessed, USI and Royal hereby agree as follows:
1. Closing. The closing of the release of claims under the terms set forth
in this Settlement Agreement (the "Closing") shall take place on June 26, 2002,
or at such other date after satisfaction or waiver of all conditions precedent
set forth in Section 6
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hereof as the parties may agree (the "Closing Date"). At the Closing, USI shall
deliver to Royal stock certificates evidencing the Preferred Stock (defined
herein).
2. Settlement Amount. USI shall cause the following payments to be made to
Royal in consideration for the releases set forth herein:
(a) Within three (3) days of this Settlement Agreement, USI agrees to
cause to be paid to Royal Two Hundred Fifty Thousand dollars ($250,000.00)
(the"Initial Payment");
(b) Ninety (90) days following the closing date of USI's initial public
offering of its common stock as currently described in USI's Form S-1 filed with
the U.S. Securities and Exchange Commission (the "SEC") on April 30, 2001 (the
"USI IPO"), or the closing date of a recapitalization of USI (the
"Recapitalization"), USI agrees to cause to be paid to Royal One Million Two
Hundred Thirty Seven Thousand Five Hundred Dollars ($1,237,500.00)(the "Second
Installment");
(c) One hundred eighty (180) days following the closing date of USI's
IPO, or the effective date of a Recapitalization, USI agrees to pay to Royal One
Million, Two Hundred Thirty Seven Thousand, Five Hundred Dollars
($1,237,500.00)(the "Final Installment"); and
(d) On the Closing Date, USI agrees to issue to Royal 353,572 shares of
USI Series Y convertible preferred shares at a $7.00 per share value
($2,475,000)(the "Preferred Stock") as described in the Certificate of
Designation attached hereto as Exhibit A. (the Initial Payment, the Second
Installment the Final Installment and the Preferred Stock, hereinafter
collectively referred to as the "Settlement Amount".)
3. Ceridian Corporation. Without the introduction of an additional
incentive payment arrangement, USI agrees to continue to work with Royal in good
faith to explore the development of insurance programs for potential
introduction to the marketing opportunity represented by the USI/Ceridian
Corporation customer referral agreement.
4. Firemans Fund Insurance Company ("FFIC") Releases. On the date of this
Settlement Agreement, Royal and FFIC and USI and FFIC shall enter into mutual
releases in connection with the Initial Payment.
5. Covenants of USI and Royal Prior to the Closing.
(a) USI will use commercially reasonable efforts to obtain all the
necessary consents, approvals and agreements of the shareholders of USI to
issue the Preferred Stock necessary to permit the consummation of this
Settlement Agreement;
(b) Royal and USI shall have entered into or shall enter into at the
time of Closing a Subscription Agreement and Shareholder's Agreement
substantially in the form attached hereto as Exhibit B (the "Ancillary
Agreements");
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(c) USI shall receive at the time of Closing from Royal consents
substantially in the form attached hereto as Exhibit C (the "Consents")
subject to the following:
(i) USI agrees that the actions authorized by Royal in the
Consents shall not be taken until such time as reasonably necessary to
effect the IPO;
(ii) USI agrees that no action shall be taken with respect to the
Consents if the IPO is no longer being considered by USI. In any case,
if USI's IPO has not been declared effective by the SEC prior to
November 1, 2002, these consents shall become null and void unless
otherwise agreed by Royal and USI;
6. Conditions to Closing. The obligations of the parties to consummate the
Closing are subject to the following conditions;
(a) The consents required to be obtained from the USI shareholders to
issue the Preferred Shares shall be in full force and effect.
(b) Royal and USI shall have executed and delivered the Ancillary
Agreements on the Closing Date.
(c) Royal shall have executed and delivered the Consents to USI on the
date of this Settlement Agreement.
Neither Royal nor USI may rely on the failure of any condition set forth in
this Section 6 to be satisfied if such failure was caused by such party's
failure to act in good faith or to use its reasonable efforts to cause the
Closing to occur.
7. Termination. This Settlement Agreement may be terminated.
(a) By Royal, in the event that USI does not issue the Preferred
Shares to Royal at the Closing;
(b) By USI or Royal, in the event that USI does not issue the
Preferred Shares to Royal prior to the USI IPO or Recapitalization;
(c) By Royal, if the USI IPO or the Recapitalization has not closed by
December 31, 2002;
(d) By Royal or USI, if there is a failure of any conditions set forth
in Section 6, that shall not have been waived by the other party (a party
cannot claim a termination pursuant this Section 7(d) if said failure was
caused by such party's failure to act in good faith or to use its
reasonable efforts to cause the Closing to occur); or
(e) By the mutual written consent of USI and Royal.
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In the event of termination of this Settlement Agreement as provided
herein, this Settlement Agreement shall become void and of no further force or
effect and the parties shall be returned to their original positions as if this
Agreement never existed, including Royal refunding the Initial Payment to USI.
8. Royal Release. Effective upon the Closing, Royal, on behalf of itself
and each of its respective directors, managers, officers, shareholders,
partners, agents, employees, attorneys, insurers, controlling persons, parent
corporations, subsidiaries, divisions, affiliates, successors and assigns
(collectively, "Related Persons"), shall hereby expressly release and forever
discharge USI and its Releases (as defined below), and each of them, separately
and collectively, from any and all obligations, liabilities, claims, damages,
charges, rights, suits in equity, actions or causes of action (now known or
which may be discovered in the near future) arising under, relating to, or in
connection with, the Agreement, Letter Agreement and the Xxxxxxxxx claim
including, without limitation, claims for contract tort or statutory remedies
seeking damages of any kind, and rights to or claims for injunctive relief,
expenses, costs, attorney's fees, losses or damages, of any kind or nature
whatsoever; provided that nothing contained herein may or shall be construed or
deemed as an admission of liability or wrongdoing. "Releasees," individually and
collectively, shall mean a party's respective and present directors, managers,
officers, shareholders, partners, agents, employees, attorneys, controlling
person, parent corporations, subsidiaries, divisions, affiliates, successors,
and assigns, and each of them, separately and collectively. In the event of a
termination of this Settlement Agreement pursuant to Section 7 above, Royal's
release hereunder will be deemed cancelled and of no further force and effect,
and any and all of USI's obligations under the Agreement and the Letter of
Agreement shall continue in full force and effect.
9. USI Release. Effective upon the Closing, USI, on behalf of itself and
each of its respective Related Persons hereby expressly release and forever
discharge Royal and its Releasees, and each of them, separately and
collectively, from any and all obligations, liabilities, claims, damages,
charges, rights, suits in equity, actions or causes of action (now known or
which may be discovered in the future) arising under, relating to, or in
connection with, the Agreement, Letter Agreement and the Xxxxxxxxx claim,
including, without limitation, claims for contract, tort or statutory remedies
seeking damages or any kind, and rights to or claims for injunctive relief,
expenses, costs, attorney's fees, losses or damages of any kind or nature
whatsoever, provided that nothing contained herein may or shall be construed or
deemed as an admission of liability or wrongdoing. In the event of a termination
of this Settlement Agreement pursuant to Section 7 above, USI's release
hereunder will be deemed cancelled and of no further force and effect, and any
and all of Royal's obligations under the Agreement and the Letter Agreement
shall be reinstated and shall not be deemed released and shall continue in full
force and effect.
10. Failure to Complete the IPO or the Recapitalization. USI agrees that if
this Settlement Agreement is terminated pursuant to Section 7 above, it will
promptly and in good faith attempt negotiate a payment schedule with Royal for
the Settlement Amount.
11. No Other Claim Holders. Each of Royal and USI represent and warrant
that no other person had or has or claims any interest in the matters referred
to herein; that each of them has the sole right and exclusive authority to
execute this Settlement Agreement, and that each of them has not sold, assigned,
transferred, conveyed or
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otherwise disposed of any claim or demand relating to any matter covered by
this Settlement Agreement.
12. Breach of this Settlement Agreement. In the event either party to this
Settlement Agreement breaches its obligations hereunder, the other party shall
be entitled to reimbursement for all reasonable fees and expenses, including
interest and reasonable attorney's fees, incurred by the other party in
connection with any action brought to enforce the terms of this Settlement
Agreement.
13. Successors and Assigns. This Settlement Agreement was the result of any
arms' length negotiation between the settling parties and shall not be construed
in favor of or against any party hereto. This Settlement Agreement shall be
binding upon and inure to the benefit of the parties hereto and each of its
respective successors and assigns.
14. Proceeding Against Release. Each of Royal and USI hereby irrevocably
convenants to refrain from, directly or indirectly, causing to be commenced, any
proceeding of any kind against any of Royal and USI and any Releasee, separately
and collectively, based upon matters purported to be released hereby.
15. Counterparts. This Settlement Agreement may be executed in two (2) or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Settlement Agreement
may be executed and delivered by facsimile transmission, with each party mailing
original signatures to the other as soon as possible thereafter.
16. Entire Agreement. This Settlement Agreement and any exhibits attached
hereto contain the entire agreement between Royal and USI relating to the
subject matter hereof and supersedes any and all previous agreements, written or
oral, between Royal and USI relating to the settlement and release of the
subject matter hereof. No amendment or modification of the terms of this
Settlement Agreement shall be binding upon Royal or USI unless reduced to
writing and signed by Royal and USI.
17. Notice. All notices and other communications hereunder shall be in
writing sent via certified mail with return receipt requested and shall be
deemed to have been given when received, in all cases addressed to the Party to
be notified as set forth below or to such other address as may be amended or
modified only in writing to the other party.
If to Royal at: Royal Indemnity Company
0000 Xxxxxxxxxx Xxxx. - MS 2218
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Xxxx Xxxxxxxx
With a copy to: Royal Indemnity Company
0000 Xxxxxxxxxx Xxxx. - MS 1313
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Esq.
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If to USI at: USI Holdings Corporation
00 Xxxxxxxxxx Xxxxxx -- 00/xx/ Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxx X. Xxxxxx
With a copy to: USI Holdings Corporation
00 Xxxxxxxxxx Xxxxxx -- 00/xx/ Xxxxx
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxxx Newborn, Esq.
18. Governing Law. This Settlement Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York, without
giving effect to conflict of law rules.
19. Assignment. Neither Party may assign or delegate this Settlement
Agreement or any rights or obligations hereunder to a third party (by operation
of law or otherwise), without the prior written consent of the other Party,
which consent will not be unreasonably withheld. Subject to the foregoing, this
Settlement Agreement shall insure to the benefit of and bind the successors and
assigns of the Parties.
20. Severability; Waiver. If any term, provision, covenant or condition of
this Settlement, or any application thereof, should be held by a court of
competent jurisdiction to be valid, void or unenforceable, that provision shall
be deemded severable and all provisions, covenants and conditions of this
Settlement Agreement, and all applications thereof not held invalid, void or
unenforceable, shall continue in full force and effect and shall in no way be
affected, impaired or invalidated thereby. The waiver of a breach of any
provision of this Settlement Agreement by any party hereto or the failure of any
part hereto to insist upon the strict performance of any provision hereof shall
not constitute a waiver of any subsequent failure to perform.
21. Additional Documents and Actions. The parties agree to execute such
additional document and take such further actions as may be necessary to execute
the terms of this Settlement Agreement.
22. Headings. This section headings in this Settlement Agreement are for
convenience only, and shall not be considered a part of, or affect the
interpretation of, any provision of this Settlement Agreement.
23. Third Party Beneficiary. This Settlement Agreement is not intended to
confer upon any person which is not a party hereto any rights or remedies
hereunder.
PLEASE READ CAREFULLY. THIS SETTLEMENT AGREEMENT AND MUTUAL RELEASE INCLUDES A
MUTUAL RELEASE OF ALL KNOWN AND UNKNOWN CLAIMS.
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IN WITNESS WHEREOF, Royal and USI have executed this Settlement Agreement
as of the date first above written.
ROYAL INDEMNITY COMPANY
By: /s/ Xxxxx X. Xxxxxxx
Name: Xxxxx X. Xxxxxxx
_______________________
Title: Senior Vice President
_______________________
U.S.I. HOLDINGS CORPORATION
By:___________________________
Name: ________________________
Title: _______________________
SWORN to before me this
7th day of June 2002
/s/ Xxxxx X. Xxx Xxxxx
_____________________
Notary
My Commission Expires: 10/04/04
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IN WITNESS WHEREOF, Royal and USI have executed this Settlement Agreement
as of the date first above written.
ROYAL INDEMNITY COMPANY
By: _________________________
Name:________________________
Title:
_______________________
U.S.I. HOLDINGS CORPORATION
By: /s/ Xxxxxx X. Newborn, II
Name: Xxxxxx X. Newborn, II
________________________
Title: SVP & General Counsel
________________________
SWORN to before me this
7th day of June 2002
/s/ Xxxxx X. Xxxxx-Xxxxxx
_________________________
Notary
My Commission Expires: 10/01/2005
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