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Exhibit 10.1
SETTLEMENT AGREEMENT AND RELEASE
This Settlement Agreement and Release ("Agreement") is entered
into by CryoLife, Inc. ("CryoLife") and St. Paul Mercury Insurance
Company ("St. Paul"). CryoLife and St. Paul are collectively
referred to herein as the "Parties."
RECITALS
WHEREAS, St. Paul issued Excess Policy No. 590CM0484 to
CryoLife, with effective dates of coverage from May 1, 2002 to May
1, 2003 (the "Policy");
WHEREAS, the Policy was excess of $10 million in underlying
coverage provided by the primary policy issued by National Union
Fire Insurance Company ($5 million) and a first-layer excess policy
issued by Zurich Insurance Company ($5 million) (collectively, the
"Underlying Policies");
WHEREAS, CryoLife also had a third layer of excess coverage,
excess of the Underlying Policies, provided by Royal Indemnity
Company ("Royal"), in the amount of $5 million ("Royal
Policy");
WHEREAS, in July 2002, a securities class action lawsuit styled
In re CryoLife, Inc. Securities Litigation ; Civil Action
No. 1:02-CV-1868-BBM in the United States District Court for the
Northern District of Georgia Atlanta Division (the "Securities
Lawsuit") was filed against CryoLife and several of its directors
and officers;
WHEREAS, in January 2003, a shareholder derivative lawsuit
styled Farley v. Anderson, et al. , Case No. 2003-CV-64109
in the Superior Court of Fulton County, Georgia (the "Derivative
Lawsuit") was filed against several of CryoLife’s directors
and officers;
WHEREAS, CryoLife submitted the Securities Lawsuit and
Derivative Lawsuit for coverage consideration under the Underlying
Policies, the Policy, and the Royal Policy;
WHEREAS, following mediation in July 2004,
CryoLife demanded that its insurers settle the Securities Lawsuit
for $16 million;
WHEREAS, St. Paul declined to tender its excess policy’s
limits of liability to settle the Securities Lawsuit for $16
million;
WHEREAS, the settlement offer in the Securities Lawsuit was
withdrawn soon thereafter;
WHEREAS, on April 4, 2005, CryoLife settled the Derivative
Lawsuit for $3.5 million;
WHEREAS, on July 21, 2005, CryoLife settled the Securities
Lawsuit for $23.25 million, consisting of $19.5 million in cash and
$3.75 million in CryoLife stock;
WHEREAS, the Parties dispute whether St. Paul acted properly by
not tendering the Policy’s limits of liability to settle the
Securities Lawsuit in July 2004 (the "Coverage Dispute");
WHEREAS, the Parties participated in mediation of the Coverage
Dispute on May 18, 2006, but were unable to reach agreement;
WHEREAS, the Parties desire to avoid the cost, expense and
uncertainty of litigation and/or mediation and therefore enter into
this Agreement to discharge all claims, controversies or disputes
between or among them arising from the Securities Lawsuit, the
Derivative Lawsuit, the Coverage Dispute and the Policy, according
to the following terms and conditions contained in this
Agreement.
AGREEMENTS AND RELEASES
Now, therefore, in consideration of the foregoing recitals and
the mutual covenants and promises hereafter set forth, this
Agreement is hereby made and confirmed between the Parties as
follows:
1.
Payment by St. Paul
In consideration of the releases set forth below, St. Paul
agrees to pay CryoLife TWO MILLION, TWO HUNDRED FIFTY THOUSAND
DOLLARS and No/100 ($2,250,000.00) (the "Settlement Amount").
St. Paul shall remit the Settlement Amount to CryoLife in the form
of a check payable to "Bondurant, Mixson & Elmore, LLP, in
Trust for CryoLife, Inc." to the offices of Bondurant, Mixson &
Elmore, LLP, 3900 One Atlantic Center, 1201 West Peachtree Street,
N.W., Atlanta, Georgia 30309 within five (5) days of the
undersigned parties executing and delivering this Agreement to Neil
Dilloff, DLA Piper US LLP, 6225 Smith Avenue, Baltimore, MD
21209-3600 and Darren Summerville, Bondurant, Mixson & Elmore,
LLP, 3900 One Atlanta Center, 1201 West Peachtree Street, N.W.,
Atlanta, Georgia 30309.
2.
Full Compliance of All Obligations
CryoLife hereby confirms, stipulates and agrees that upon
execution of and performance of the obligations set forth in this
Agreement, St. Paul will have fully and completely satisfied all
obligations, requirements and duties owed to CryoLife and all other
Insureds under the Policy, under common law, statute, or otherwise,
relating to the matters released herein, including without
limitation the Securities Lawsuit, the Derivative Lawsuit, the
Coverage Dispute and the Policy.
3.
Mutual Releases
In consideration of the recitals set forth herein, execution of
this Agreement, payment of the Settlement Amount and other good and
valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, CryoLife, on its behalf and on behalf of any
and all other insured persons, entities or organizations who claim
or who may claim any right under the Policy, covenants not to sue
St. Paul and releases, acquits and forever discharges St. Paul, its
present,
former and future parent companies, managers,
divisions, subsidiaries, affiliates, associates, representatives,
predecessors, successors, heirs, owners, assigns, directors,
agents, attorneys, third party administrators, partners,
principals, officers, employees, trustees, representatives,
insurers, reinsurers and all other persons, natural and corporate,
in privity with it, separately or severally, from any and all past,
present or future claims, demands, suits or causes of action of any
kind whatsoever, including but not limited to claims for coverage
and indemnification, at common law, statutory, or otherwise, which
CryoLife has or might have, known or unknown, arising out of the
Securities Lawsuit, the Derivative Lawsuit, the Coverage Dispute or
the Policy, specifically including all claims for reimbursement or
indemnification of all fees or costs arising from or related in any
way to the defense and settlement of the Securities Lawsuit, the
Derivative Lawsuit or the Coverage Dispute.
This Agreement specifically includes, but is not limited to, any
claims or causes of action for compensatory, punitive or statutory
damages based upon any alleged breach of the duty of good faith and
fair dealing, unfair claims settlement practices, violation of any
statute, including without limitation O.C.G.A. § 33-4-6, and
any other applicable provision of the Georgia Insurance Code, or
any other acts, omissions, obligations, requirements and duties in
any way arising out of, relating to, or in consequence of the
Securities Lawsuit, the Derivative Lawsuit, the Coverage Dispute
and the Policy.
In consideration of the recitals set forth herein, e
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