travelers v bailey -- chubb joint appendix -- us sup ct

8/20/2019 Travelers v Bailey -- Chubb Joint Appendix -- US Sup Ct

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Nos. 08-295 & 08-307

IN THE

g tmrt

THE TRAVELERS INDEMNITY COMPANY,et aL,Petitioners,

-and-

COMMON LAW SETTLEMENT COUNSEL,

Petitioners,

PEARLIE BAILEY,et al.,Respondents.

ON WRITS OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

JOINT APPENDIX FOR RESPONDENTCHUBB INDEMNITY INSURANCE COMPANY

Coun sel of Record

W ILLIAM P. SHELLEYJACOB C. COHN*COZEN O’CONNOR

1900 Market StreetPhiladelphia, PA 1910 3~215) 665-2147

Counsel .for RespondentChubb Indemnity Insurance

Company

PETITION FOR CERTIORARI FILED SEPTEMBER 4, 2008

CERTIORARI GRANTED DECEMBER 12, 2008


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TABLE OF CONTENTS

Appendix A -- Excerpts From ManvilleMemorandum In Support Of Approval Of TheInsurance Settlement Agreement Of TheUnited States Bankruptcy Court For TheSouthern District Of New York Dated March18, 1985 ..................................

Page

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Appe~dix B -- Excerpts Of Memorandum Of TheLegal Representative Of The United StatesBankruptcy Court For The Southern DistrictOf New York ............................. 9a

Appendix C -- Letter To Dennis J. Drebsky,Peter Keane And Peter Schlesinger DatedJune 3, 1985 .............................. lla

Appendix D -- Amended Statutory DirectAction Settlement Agreement ............. 15a

Appendix E Common Law Direct ActionSettlement Agreement .................... 4 0a

Appendix F Hawaii Direct Action SettlementAgreement ............................... 61a

Appendix G Second Amended SchedulingOrder With Exhibit A Of The United StatesBankruptcy Court For The Southern DistrictOf New York Dated June 9, 2004 ........... 82a


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~l~r~k Page


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APPENDIX A -- EXCERPTS FROM MANVILLEMEMORANDUM IN SUPPORT OF APPROVAL OF

THE INSURANCE SETTLEMENT AGREEMENTOF THE UNITED STATES BANKRUPTCY COURTFOR THE SOUTHERN DISTRICT OF NEW YORK

DATED M ARCH 18, 1985

UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK

In Proceedings for aReorganization Under

, Chapter 11

Case Nos. 82 B 11656Through 82 B 11676 (BRL)

In re

JOHN S-MANVILLE CORPORATION,et al.

Debtors.

MANVILLE MEMORANDUMIN SUPPORT OF APPROVAL OF THE

INSURANCE SETTLEMENT AGREEMENT

By releasing its Insurers, Manville seeks only touphold the most basic bankruptcy power the powerto enjoin third parties from enforcing their claimsagainst property of the debtor itself once the propertyhas been reduced to a cash fund and those claims have


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33

Appendix A

any of the so-called "direct action claimants" plaintiffswho happen to reside in one of the few States whichpermit them to bring lawsuits against Manville’sInsurers on the Insurers’ obligations to Manville. Suchdirect actions, clearly derivative of Manville’s rightsunder the policies, are covered and would be released.*

Drawing from a deeply flawed analogy to casesinvolving the release of a "debtor’s guarantor" or "co-obligor", the Objectors argue that such "direct action"claimants hold "independent" claims which this Court

cannot "discharge." Manville does not dispute decisionsholding that this Court would not have the power to"discharge" a guarantor or co-obligor from hisobligations to a third party merely because theguarantor or co-obligor was willing to make fundsavailable to the Manville estate. First National Bankv. Poland Union,109 E2d 54, 56 (2d Cir.), cert. denied,309 U.S. 682 (1940). Such cases are inapposite, however,because none involved property of the estate; each ofthose cases involved a third party such as a guarantor,a co-obligor, or a shareholder against whom the debtor

had no claim. Manville would simply have no claimagainst any such guarantor as to which it could ask thisCourt to allow it to compromise and settle; nor wouldthe third party be asserting rights deriving from thedebtor. However, the fact that certain asbestos plaintiffs

* Without entering the fray as to what rights "futureclaimants may have under the Bank ruptcy Code, any effort bya "future claimant" to assert claims against the SettlingInsurers deriving from Manville’s insurance policies would, likedirect action rights, be included w ithin the release.


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Appendix A

have the procedural ability to pursue Manville’s claimsagainst its Settling Insurers for their own benefit doesnot divest this Court of its fundamental jurisdiction tomarshal and distribute the assets of the Manville estate.

This Court’s power to compromise claims of thedebtor even when they are also enforceable by a thirdparty is well recognized by the very cases the Objectorscite in support of their illicit "discharge" allegations.Thus, for example, in In re 1775 Broadway,79 E2d 108,110 (2d Cir. 1935), the Second Circuit did hold that the

Bankruptcy Court has no jurisdiction to release theindependent tort claims certain noteholders of debtormight personally have against an indenture trustee.The Court reasoned that:

"[c]laims arising from misrepresentation inthe sale of notes were not claims.., that mustbe settled in order to bring property into thereorganized company." Id. at 110.

However, the Second Circuit carefully distinguished

such claims from tlqte bankrupt estates’ "claims formismanagement of tlq~e trust against the trustee." Eventhough these latter claims were also held by theindividual bondholders, the Second Circuit determinedthat they were subject to the Bankruptcy Court’sjurisdiction. Accordingly, the Court wrote that theBankruptcy Court "might have ordered [such claims]released after being satisfied that it was fair and just todo so and that sufficient consideration was paid


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Appendix A

therefor." Id. at 110. In so holding, the Court reasonedas follow s:

"A release of liability for mismanagement ofthe trust pertained to the trust res to beturned over in the reorganization. Thedetermination as to releasing such liability wasa duty cast upon the judge both in the interestof the debtor and of the noteholders. Inreaching a determination, the court wasobliged to appraise the possibility of success

in prosecuting such claims and consider it inthe light of the prospects of benefit tothe noteholders under the plan ofreorganization." Id.

Contrary to the Objectors’ misperceptions, Manvilledoes not seek to have this Court release its SettlingInsurers from any claims by third parties based on theInsurer’s own tortious misconduct towards the thirdparty, as opposed to its misconduct towards Manville.Manville seeks only to release the Settling Insurers from

the rights Manville might itself have against them orrights derivative of Manville’s rights under the policiesbeing compromised and settled. According to theSecond Circuit, this Court is "duty" bound to effectuatesuch a release if it determines that the SettlementAgreement is "fair and just" and "that sufficientconsideration was paid therefor." Id.

All of the other cases cited by the Objectors are inline with the Second Circuit in recognizing that the


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Appendix A

bankruptcy courts lack power to discharge independent claims of third parties againstnondebtors. These cases do not, however, abrogate thisCourt’s essential power to release claims of the debtor,along with any derivative claims of third parties, againsta nondebtor so as to compromise, .to settle, and toliquidate all of the assets of the debtor’s estate.*

It is precisely because a third-party claim against aguarantor or co-obligor is an "independent" claim notheld by the debtor :itself that the cases cited by the

Objectors declare such claims to be outside of theBankruptcy Court’s jurisdiction to compromise andsettle. Thus, in affirming that a trustee in bankruptcydoes not have the power to sue an indenture trustee formisconduct on behalf of bondholders, the Supreme Courtin Caplin v. Marine Midland Grace Trust Co., 406 U.S.416 (1972), relied on the fact that "[n]owhere does

* In two cases cited by the Objectors, the claim against thedebtor had been discharged, and the insurer attempted to avoidany payment solely by arguing that the insured had beenreleased. Pickett v. Carolina Casualty Insurance Co.,734 E2d793 (11th Cir. 1984); In re Bracy, 449 E Supp. 70, 71 (D. Mont.1978). The courts, therefore, held that the claims against theinsurer were not discharged. A crucial difference between thesecases and the instant case is that in neither Pickett nor Bracyhad a payment from the insurer to the debtor or a compromisebetween the debtor and the insurer provided funds within thejurisdiction of the bankruptcy court from which the claimantcould be satisfied. In contrast, the purpose of the SettlementAgreement is to provide a fund for compensation of certainclaim ants and to obviate their need to proceed directly againstinsurers.


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7a

Appendix A

petitioner argue that Webb & Knapp [the bankrupt]could make any claim against marine [the indenturetrustee]." Id. at 429.

The Law Research settlement agreement"prescribed in detail the provisions of the arrangementwhich LRS was to submit for approval." Id. at 305.According to the Second Circuit, an essential provisionin the agreement was "upon confirmation of the

arrangement, the release of Western Union and thoseassociated with it from all claims arising out of theagreement between Western Union and LRS." Manvilleseeks no more in its Settlement Agreement.

As the Second Circuit in Law Researchexplained:

"in return for purposes of enabling LRS topropose and effectuate an arrangementunder Chapter XI of the Bankruptcy Act,Western Union agreed to pay LRS or suchothers as the bankruptcy court may direct a’Compromise Settlement’ of $1,440,000 incomplete settlement of all claims against it."Id.

The settlement agreement was supplemented by a letterwhich specifically provided for those creditors who held


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APPENDIX B -- EXCERPTS OF MEMORANDUMOF THE LEGAL REPRESENTATIVE OF THEUNITED STATES BANKRUPTCY COURT FOR THE

SOUTHERN DISTRICT OF NEW YORK

UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK

Chapter 11 Case Nos.82-8-11656 Through82-8-11676 Inclusive

(BRL)

In re

JOHN S-MANVILLE CORPORATION,et al.

Debtors.

MEMORANDUM OF THE LEGALREPRESENTATIVE

The Legal Representative submits this

memorandum to set forth his position with respect toManville’s application for approval of its settlementagreement with Travelers Indemnity Company, HomeInsurance Company, and certain syndicates of Lloyds,London (the Insurance Agreement).

Preliminary Statement

Both the proponents and opponents of the InsuranceAgreement have submitted lengthy, careful and well


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Appendix B

reasoned memoranda to the Court. Yet, despite the vigorof the arguments presented, a careful reading of thesememoranda reveals, we submit, basic agreement on theapplicable legal principles and authorities that aredeterminative of this application. Thus, the major itemsof dispute seems to be the interpretation of the languageof the Insurance Agreement and whether that languageplaces the Insurance Agreement within the appropriatelegal standards.

B. Scope of the Injunction, Indemnity and Set Off

All parties seem to agree that any injunction,channeling order and release is limited to this Court’sjurisdiction over the res and then proceed to disagreeas to whether the relevant language of the InsuranceAgreement is limited to this Court’s in rein jurisdiction.Thus we consider it appropriate that the Court find thatit has in rein jurisdiction over the Policies and that theinjunction and channeling order requested is in rein.


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lla

APPENDIX C -- LETTER TO DENNIS J. DREBSKY,PETER KEANE AND PETER SCHLESINGER

DATED JUNE 3 1985

June 3, 1985

Dennis J. Drebsky, Esq.Skadden Arps Slate

Meagher & Flom919 Third AvenueNew York, New York

Peter Keane, Esq.Lord Day & Lord25 BroadwayNew York, New York 10004

Peter Schlesinger, Esq.Simpson Thacher & BartlettOne Battery Park PlazaNew York, New York 10004

Dear Dennis, Peter and Peter:

This letter clarifies the intent of the parties withrespect to certain provisions of, the SettlementAgreement dated July 18, 1984 between the JMPlaintiffs (as defined in that agreement), and theSettling Insurers (as defined in that agreement), and(if necessary) shall be deemed to be an "amendment"for purposes of Section 13(d) thereof. The relevantprovisions, and the agreed upon interpretations, are setforth below:


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Appendix C

1. Page 6 - Definition of "JM Responsible Entity."The reference to "MI" in the last sentence of thisdefinition is for illustrative purposes only and was notintend ed to require in any way that the JM ResponsibleEntity be the same as or similar to the "MI" entityreferred to therein, unless, of course, the October 17,1983 Plan were to be confirmed.

2. Page 8 - Definiitions of ’~’ Plan , Plan ConfirmationDate" and "Plan Confirmation Order" - All of thesedefinitions refer to any plan of reorganization that is

confirmed irrespective of its terms, who proposes it, orany similarities - or lack thereof- with the Joint Plan ofReorganization dated October 17, 1983. None of thesedefined terms, or the:ir use at any point in the InsuranceSettlement Agreement, was intended to or does imposeany obligation with respect to the substance or natureof any plan.

3. Page 15 - Paragraph 2(e) - the phrase "Manvilleand the JM Debtors agree that this Agreement shallbe embodied in and become part of the Plan."

This phrase was not intended to require that theAgreement be a ter~n or condition of the Plan. Whatwas intended is th at the Agreement (and any final ordersrelating thereto) shall survive confirmation of the Planand be referred to ar.td reaffirmed in the Plan, and theSettlement Agreement’s major elements, particularlythe injunction and channeling order, be disclosed as partof the plan confirmation process. This disclosure maybe accomplished by, inter alia, making the Agreementand/or such orders exhibits to the Plan.


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Appendix C

4. Page 28 - Paragraph 8(a)(ii) - This Paragraphwas not intended to require that provisions (A) through(E) be included in haec verbs in the Plan ConfirmationOrder. This paragraph will be satisfied if the PlanConfirmation Order reaffirms a final order previouslyentered containing paragraphs (A)-(E).

5. Page 28 - Paragraph 8(a)(ii.) (B) - This paragraphwas not intended to impose any requirements withrespect to the ultimate disposition of the SettlementFund. Nor does it attempt to dictate how, or in what

manner, property damage claims shall be dealt with in aplan. Determinations of such matters and who has whatinterest in the Settlement Fund are, of course, forfurther order of the Court.

6. Page 37 - Paragraph 12 - The intent of thisprovision was that the Settling Insurers shall not objectto the "Disposition of Settlement Fund Remainder" asit may be treated in a plan.

7. Page 28 et seq. and Exhibit E - The injunctionand channeling order.

Page 19et seq. - Paragraph 5 - The indemnity.

The court has in rein jurisdiction over the Policiesand thus the power to enter appropriate orders toprotect that jurisdiction. The channeling order isintended only to channel claims against the res to theSettlement Fund and the injunction is intended only torestrain claims against the res (i.e, the Policies) which


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Appendix C

are or may be asser~ed, against the Settling Insurers.The indemnity serves primarily as a backstop againstthe failure of the injunction.

8. Page 26 - Paragraph 7 - Paragraph 7 is notintended to inhibit transactions, if any, between the JMResponsible Entity and any JM Insured provided suchtransactions do not directly or indirectly impair thebenefits provided by Paragraph 7(b).

The undersigned, are authorized to sign this letteron behalf of their respective clients.

Please sign and return the enclosed copy of thisletter.

Sincerely yours,

/s/Lowell Gordon Harriss

The foregoing is confirmedon behalf of The Travelers Indemnity Companyon behalf of itself and each of its Affiliates

/s/


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APPENDIX D -- AMENDED STATUTORYDIRECT ACTION SETTLEMENT AGREEMENT

AMENDED SETTLEMENT AGREEMENT

SETTLEMENT AGREEMENT (as definedherein), dated as of March 5, 2004, as amended as ofMarch. 26, 2004, made and entered into by and between(i) the Settlement Counsel (as defined herein) on behalfof all Persons (as defined herein) who have assertedStatutory Direct Action Claims (as defined herein) and(ii) The Travelers Indemnity Company and TravelersCasualty and Surety Company (formerly known as The

Aetna Casualty and Surety Company);

WHEREAS, Travelers (as defined herein) conteststhe allegations of the Pending Statutory Direct Actions(as defined herein) and the validity of the threatenedlawsuits and any liability thereunder;

WHEREAS, Travelers believes that all direct actionclaims, including but not limited to the Statutory DirectAction Claims, whether sounding in tort or contract orbrought pursuant to statute, are barred by theConfirmation Order and Insurance Settlement Order(as defined herein) entered by the Bankruptcy Court inIn re Johns-Manville Corp.;

WHEREAS, the Parties (as defined herein) nowdeem it to be in their best interests to settle and fullyand finally compromise in accordance with the terms ofthis Settlement Agreement all disputes, issues andobjections that now exist or might exist in the futurebetween and among them concerning the StatutoryDirect Action Claims;


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Appendix D

NOW, THEREFORE, in consideration of theforegoing and the mutual promises contained herein,the sufficiency of which is hereby acknowledged, THEPARTIES AGREE AS FOLLOWS:

1. Definitions

(a) "Bankruptcy Code" shall mean Title 11 of theUnited States Code, 11 U.S.C. §§ 101 et seq., asamended from time to time.

(b) "Bankruptcy Court" shall mean the UnitedStates Bankruptcy Court for the Southern District ofNew York.

(c) "Claims" sha]ll mean the assertion of any rightor remedy including, without limitation, all past, presentand future claims, counts, cross-complaints,counterclaims, affir~native defenses, writs, demands,inquiries, requests, suits, lawsuits, rights, actions,damages, liens, contr.acts, policies, indemnity or defenseobligations, agreements, promises, undertakings, claims

for indemnity, contribution or the like, liabilities,judgments, settlements, losses, costs, expenses,administrative proceedings, directives, governmentalactions or other causes of action or orders, whetherknown or unknown, asserted or unasserted, manifestedor unmanifested, secured or unsecured, matured orunmatured, disputed or undisputed, foreseen orunforeseen, fixed or contingent, direct or indirect,whether in law, equity, bankruptcy, admiralty orotherwise, relating in any way whatsoever to bodily


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Appendix D

injuries, death or damages of any kind or nature to aPerson (including, but not limited to bodily injury,illness, wrongful death, mental anguish, emotionaldistress, medical monitoring, fear of bodily injury illnessor death, loss of consortium (including spousal,children’s or parental consortium), loss of love, societyand companionship, attorneys’ fees, expenses, andpenalties or recompense) arising from or relating in anyway to asbestos, exposure to asbestos, knowledge aboutasbestos or the handling, defense, trial, appeal orsettlement of asbestos-related claims or the

participation in the handling, defense, trial, appeal orsettlement of asbestos-related claims, further includingbut not limited to Claims for economic damages,consequential damages and punitive damages. "Claims"shall not include Claims for damages to real propertyas a result of the presence of asbestos in such realproperty, provided that if any such Claim includesallegations that the presence of asbestos does or maycause injury to Persons in addition to real propertydamage, such Claim shall be included in the definitionof Claim herein but only to the extent such Claim seeks

damages for any such injury to such Person.

(d) "Clarifying Order" shall mean an order or ordersof the Bankruptcy Court, issued pursuant to theConfirmation Order, the Insurance Settlement Orderand/or Sections 105(a), 524(g), 1141 and 1142 of theBankruptcy Code and the Court’s inherent powers.

(e) "Confirmation Order" shall mean the December22, 1986 Order of the United States Bankruptcy Court


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Appendix D

for the Southern Dk,~trict of New York in In re Johns-Manville Corp. 82 t~ 11656, 82 B 11657, 82 B 11660, 82B 1166 1, 82 B 1166 5 through 82B 11673 inclusive, 82 B11675, 82 B 11676 (BRL).

(f) "Direct Action Settlement Fund" shall mean thefund created pursuartt to Paragraph 4 of this SettlementAgreement in settlement of Statutory Direct ActionClaims.

(g) "Direct Action Settlement Fund Administrator"shall mean the Person selected and approved asdescribed in Paragraph 4(c) who will administer theDirect Action Settlem ent Fund.

(h) "Entity" means any corporation, limited liabilityentity, partnership, association, trust and any otherentity (including any estate, guardian or beneficiarythereof), or organization, including, without limitation,any federal, state or local government, or quasi-governmental body or political subdivision, department,agency or instrumentality thereof, or any Person.

(i) "Execution Date" shall mean the earliest dateon which all the Signatories hereto have fully executedthis Settlement Agreement.

(j) "Final Order" shall mean an order as to whichthe time to appeal, petition for certiorari, motion forreargument or rehearing has expired and as to whichno appeal, petition for certiorari or other proceedingfor reargument or rehearing shall be pending or as to


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Appendix D

which any right to appeal, petition for certiorari ormotion for reargument or rehearing shall have beenwaived in writing by the Entity possessing such rightor in the event of an appeal, writ of certiorari or motionfor reargument or rehearing has been sought, suchorder shall have been affirmed by the highest court towhich such order was appealed or certiorari has beendenied and the time to take any further appeal orpetition for certiorari shall have expired.

(k) "Hawaii Direct Actions" shall mean the following:

(i) the putative class action lawsuits captioned LorenzoBaclaan et al. v. Combustion Engineering, Inc. et al.,Case No. 03-00325, United States District Court for theDistrict of Hawaii, and Geo rge Toro, et al. v. Comb ustionEngineer ing, Inc., et al., Case No. 03-00326, UnitedStates District Court for the District of Hawaii; (ii) thelawsuit captioned Theodore K. Hopkins, et al. v.Combustion Engineering, Inc., et al., Case No. 03-00401, United States District Court for the District ofHawaii; and (iii) any other pending Claim againstTravelers, whether under a statute or common law,

arising from or relating to Travelers’ alleged acts,omissions or involvement of any type in the handling,defense, trial, appeal or settlement of any Claim or theparticipation in the handling, defense, trial, appeal orsettlement of any Claim against CombustionEngineering, Inc. (and its past, present or futureparents, subsidiaries, divisions or affiliates) in Hawaiiprior to the Execution Date.


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Appendix D

(1) "Insurance Settlement Order" shall mean theDecember 18, 1986 Order of the United StatesBankruptcy Court fo~., the Southern District of N ew Yorkentered in In re Johns-Manville Corp., 82 B 11656, 82B 11657, 82 B 11660, 82 B 11661, 82 B 11665 through82B 11673 inclusive, 82 B 11675, 82 B 11676 (BRL).

(m) "Mediator" means the Honorable Mario Cuomoor such successor mediator as may be appointed by theBankruptcy Court.

(n) "Parties" shall mean all Persons who haveasserted a Statutory Direct Action Claim, SettlementCounsel, and Travelers.

(o) "Pending Statutory Direct Actions" shall meanthe following putatiw~ class action lawsuits filed againstTravelers: (i) each of the lawsuits consolidated underIn Re Asbestos - Unfair Trade Practices InsuranceCases, N o. 02-C-7 00 0, Circuit Court of Kanaw ha County,West Virginia, and (ii) Agnes C ashman, et al. v. TravelersIndemnity Company, et al., Civ. A. No. 02-2056,

Superior Court of Suffolk County, Commonwealth ofMassachusetts.

(p) "Person" shall mean any individual, class orgroup of individuals, their heirs, executors,representatives, administrators, estates, agents,successors and assig:as.


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Appendix D

(q) "Settlement Agreement" means this agreementand the exhibits thereto and shall include anyamendment as provided herein.

(r) "Settlement Amount" shall mean the aggregateamount of the payment obligations set forth inParagraph 3, as it may be reduced pursuant toParagraph 5(b).

(s) "Settlement Counsel" shall mean the followinglaw firms as representatives and counsel of Persons whohave asserted a Statutory Direct Action Claim: (i)Mo tle:y, Rice LLC, (ii) B aron & Budd, P.C., (iii) Tho rnton& Naumes LLP, (iv) Law Office of Lawrence Madeksho,(v) Wilentz, Goldman & Spitzer, PA; and (vi) Galiher,DeRobertis Nakanmura Ono Takitani.

(t) "Statutory Direct Action Claims" shall mean (i)the Pending Statutory Direct Actions and (ii) all otherClaims by Persons who presently hold Claims, whetherasserted or unasserted, under the statutes, laws orregulations of Florida, Hawaii, Kentucky, Louisiana,Massachusetts, Montana, New Mexico, North Carolina,Nortl~ Dakota, South Carolina, and West Virginia againstTravelers arising from or relating to any acts oromissions of Travelers in (a) the handling, defense, trial,appeal or settlement or participation in the handling,defense, trial, appeal or settlement of any Claim, (b)disclosing, failing to disclose, suppressing, misleading,conspiring with any Entity to disclose or fail to disclose,suppress or mislead or acting in concert with any Entityto disclose or fail to disclose or suppress or mislead with


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Appendix D

arising from acts, omissions, conduct or issuance ofinsurance by the Released Parties. "Travelers" shallalso include past parents, subsidiaries or sistercompanies of any of the Released Parties (or successorsof any of the foregoing), provided however that nothingin this Settlement Agreement shall be construed torelease any such past parent, subsidiary or sistercompany that no longer is a parent, subsidiary or sistercompany of any of the Released Parties as of November19, 2003 for their own conduct after its ownership of orby or affiliation with any of the Released Parties ended

and not relating to or arising from acts, omissions,conduct or issuance of insurance by any of the ReleasedParties. By way of example, "Travelers" shall not includeAetna Inc., or any of its predecessors in interest, for itsown conduct post-dating April 1996 relating to or arisingfrom acts, omissions, conduct or issuance of insuranceand not relating to or arising from acts, omissions,conduct or issuance of insurance by any of the ReleasedParties.

2. Conditions Precedent

Travelers’ obligations hereunder, other than thepayment set forth in Paragraph 3(b), are subject to andmade expressly contingent upon the satisfaction of eachof the following conditions precedent:

(a) Entry of (i) a Settlement Approval Order, and(ii) a Clarifying Order containing prohibitions againstClaims at least as broad as those contained in ExhibitA, which orders shall have become a Final Order(s), and


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Appendix D

entry of which shall have been preceded by notice ofthe hearing on the raotion to approve this SettlementAgreement in a form and manner acceptable to theParties and as approved by the Bankruptcy Court. Suchnotice shall reasonably put Persons on notice of thisSettlement Agreement and be provided at least toclaimants to the Manville Personal Injury SettlementTrust ("Manville Trust") who resided or filed asbestos-related bodily injury Claims in the states of Floricla,Hawaii, Kentucky, Louisiana, Massachusetts, Montana,New Mexico, North. Carolina, North Dakota, SouthCarolina, and West Virginia.

(b) Entry of an Order approving the settlementagreement pertaining to the Hawaii Direct Actions andenjoining: i) all members of the putative class from theprosecution of t~he tIawaii Direct Actions under anytheory of liability pursuant to any direct action statute,or common law thec,ry against Travelers; and ii) anyrelated Claims for indemnification, contribution andthird-party Claims, in Hawaii or under Hawaii law,against Travelers which Order shall have become a Final

Order.(c) After the entry by the Bankruptcy Court of an

Order that approves the form and manner of notice anddirects Settlement Counsel to communicate the termsof this settlement and other procedural matters to allpotential claimants to the Direct Action SettlementFund, no fewer than forty-nine thousand (49,000) generalreleases by Persons who hold Statutory Direct ActionClaims in the form attached hereto as Exhibit B, as


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Appendix D

further described in Paragraph 5 of this SettlementAgreement, shall be executed and delivered into escrow,subject to the right of the Direct Action SettlementFund Administrator to deny any such claim that theAdmi~istrator determines is not a Qualifying Claim inaccordance with the procedures attached hereto asExhibit C. Settlement Counsel agree to use best effortsto obtain such releases by all claimants who meet thecriteria for a Statutory Direct Action Claim. Upon thedeposit of at least 49,000 general releases into escrow,the escrow agent shall certify to Travelers in writing

that it has received at least 49,000 releases as providedby this section. This condition shall not be deemedsatisfied until such certification has been received byTravelers. Travelers shall have the right to inspect suchreleases upon reasonable notice to the escrow agent.

3. Payment of Settlement Amount

(a) Upon satisfaction of each of the conditions setforth in Paragraph 2 hereof and subject to the provisionsof Paragraph 5(b) hereof, The Travelers Indemnity

Company and/or Travelers Casualty & Surety Companyshall pay within five (5) business days:

(1) A single payment of three hundred sixtymillion dollars ($360,000,000.00) to theDirect Action Settlement Fund;

and


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Appendix D

(2) A single payment of thirty-seven millionfive hurLdred thousand dollars($37,500,000.00) of attorneys’ fees to atrust account designated by SettlementCounsel.

(b) The Travele:~s Indemnity Company has paid,and Settlement Counsel acknowledge that TheTravelers Indemnity ,Company has advanced, five milliondollars ($5,000,000.00) to them to fund (i) the costsassociated with the formation and administration of theDirect Action Settlement F~nd (including but not limitedto the payment of the Administrator, of all reasonable,necessary fees and expenses in carrying out his/herduties, and of all professional and administrativepersonnel reasonably required to carry out his/herduties), and (ii) the costs of implementing thisSettlement Agreement, including the costs of notifyingclaimants of this settlement, mediation, settlementmaster, and experts and the like but excludingattorneys’ fees other than those of bankruptcy counselretained to represen~ Persons holding Statutory Direct

Action Claims in connection with approval of thisSettlement Agreement. If the costs described in thissubparagraph are less than $5,000,000.00, then theSettlement Counsel shall return the remainder to TheTravelers Indemnity Company. If the costs associatedwith this paragraph exceed $5,000,000.00, thenTravelers Indemnity Company shall provide additionaladvances sufficient to pay all reasonable and necessaryamounts that constitute said costs.


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Appendix D

(c) Notwithstanding anything else in this SettlementAgreement to the contrary and separate and apart fromany other terms and conditions set forth herein, the non-occurrence or failure to satisfy any of the conditionsprecedent set forth in Paragraph 2 shall relieveTravelers from any obligation whatsoever under thisSettlement Agreement, including, but not limited to, theobligation to pay any portion of the Settlement Amountwith the exception of the payments described inParagraph 3(b) above.

(d) The Settlement Amount shall be a full and finalsettlement. The Parties agree and jointly representthat the Settlement Amount to be paid by TheTravelers Indemnity Company and/or TravelersCasualty and Surety Company pursuant to thisSettlement Agreement constitutes fair and reasonableconsideration. The general releases delivered hereunderare final and non-revocable (regardless of any ruling byany court) as soon as delivered into escrow as long as (i)this Settlement Agreement has been approved by a FinalOrder and (ii) a determination by the Direct Action

Settlement Fund Administrator has been madeproviding the releasing party with a right to paymentfrom the Direct Action Settlement Fund.

4. Direct Action Settlement Fund

(a) Settlement Counsel shall create a Direct ActionSettlement Fund into which Travelers IndemnityCompany and/or Travelers Casualty and SuretyCompany shall make payment in accordance with andsubject to the terms of this Settlement Agreement.


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Appendix D

(b) The Direct Action Settlement FundAdministrator shall administer and pay QualifyingClaims (as that term is defined in Exhibit C) inaccordance with the procedures attached hereto asExhibit C.

(c) The Direct Action Settlement Fund shall beadministered by the Direct Action Settlement FundAdministrator, who shall be a Person selected bySettlement Counsel within thirty days of the ExecutionDate and who shall be authorized to commence

operating under thi~,~ Settlement Agreement, and whothereafter shall be subject of a motion for approval bythe Bankruptcy Court nunc pro tunc.

5. Releases by Claimants

(a) Any Person who receives payment from theDirect Action Settlement Fand shall sign and deliver toTravelers a general release, in the form attached heretoas Exhibit B. To the extent applicable state law imposesany additional requirements in order to enforce in whole

or in part the general releases contemplated by thisSettlement Agreement, Settlement Counsel agree totake all steps necessary to obtain such general releasescontemplated by this Settlement Agreement in a formthat conforms with applicable state law.

(b) In the event that Travelers receives fewer than65,000 general releases from claimants with .QualifyingClaims (as that term. is defined in Exhibit C) within oneyear of the date the Direct Action Settlement Fund


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begins administering claims, Travelers shall be entitledto reimbursement from the Fund, computed as follows:(1/65 ,000 x $397 ,500 ,000) x N , where N = the differencebetween 65,000 and the actual number of generalreleases issued to Travelers in accordance with thisSettlement Agreement. In the event that Travelersreceives fewer than 70,000, but more than 65,000 generalreleases from claimants with Qualifying Claims (as thatterm is defined in Exhibit C) within one year of the datethe Direct Action Settlement Fund begins administeringclaims, Travelers shall be entitled to reimbursement

from the F~nd in an amount calculated as follows: ½ x(1/70 ,000 x $39 7,500 ,000 ) x N, where N = the differencebetween 70,000 and the actual number of generalreleases issued to Travelers in accordance with thisSettlement Agreement. Releases shall be provided byPersons who fall within one of the four categories ofQualifying Claims (as that term is defined in Exhibit C)and thus Claims that are derived in whole or in partfrom such Qualifying Claims including but not limitedto claims for loss of consortium (including spousal,children’s or parental consortium) shall not be included

in calculating the numbers of releases required by thissection.

6. Stays and Dismissals With Prejudice of Lawsuits

(a) Upon execution of this Settlement Agreement,Settlement Counsel on behalf of all plaintiffs andputative class members agree to continue to stay thePending Statutory Direct Action Claims as againstTravelers pending a Final Order approving thisSettlement Agreement.


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(b) Upon the Settlement Approval and ClarifyingOrder containing prohibitions against Claims at leastas broad as those contained in Exhibit A becoming aFinal Order, all named plaintiffs shall promptly dismisswith prejudice as against Travelers the PendingStatutory Direct Actions.

7. Attorneys’Fees

The Parties understand and agree that the DirectAction Settlement Fund is an entity that shall be

independent of the Manville Trust, and thatcompensation for legal services for claims made againstthe Direct Action Settlement Fund as between a claimantand his or her counsel will be subject to the contractsfor legal services between a claimant and his or hercounsel, and that the Order approving this Settlementwill specify that any prior Order in this. case pertainingto compensation for legal services for claims madeagainst the Manvil]le Trust will not apply to claimsagainst the Direct Action Settlement Fund. Travelersfurther agrees that it will not challenge any of said

individual contract~,~ for legal services on any basiswhatsoever.

8. Not Evidentiary and Not an Admission

The Parties agree that no part of this SettlementAgreement may be used in any proceeding as evidenceof their respectiw~ rights, duties or obligations;provided, however, that this restriction shall not applyto any proceeding irL connection with or related to the


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into, or seek to introduce at any trial or proceeding,pending and future, evidence of such communications.

10. Successors

This Settlement Agreement shall not be construedto inure to the benefit of any Entity other than Travelers.

11 mendments

No amendments or variations of the terms of thisSettlement Agreement shall be valid unless made inwriting and signed by Settlement Counsel and Travelersand approved by the Bankruptcy Court.

12. Execution

This Settlement Agreement may be executed induplicate counterpm:ts, each of which shall be deemedan original. A facsimile or telecopy of a Party’s signaturehereto shall be as va:[id, binding, and enforceable as theoriginal thereof.

13. Representation of Authority

The individuals ~igning this Settlement Agreementhereby represent to each other, the Mediator and theBankruptcy Court that they are authorized to enter intothis Settlement Agreement on behalf of all Personswhom they purport to represent and to bind theirprincipals to this Selztlement Agreement.


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14.Construction

This Settlement Agreement is not a contract ofinsurance and the Parties agree that any special rulesof interpretation or construction of insurance contractsshall not apply. This Settlement Agreement is theproduct of arm’s length negotiations between and amongthe Parties and counsel in a mediation ordered by theBankruptcy Court under the auspices of the HonorableMario Cuomo. Each of the Parties hereto hasparticipated in the drafting of this Settlement

Agreement. Therefore, it is the intent of the Parties thatno part of this Settlement Agreement shall be construedagainst any other Party because of the identity of thedrafter or because Travelers is an insurance company.

15. Headings

Paragraph headings contained herein are forpurposes of organization only and shall not constitute apart of the terms of this Settlement Agreement.

16. Entire Agreement

This Settlement Agreement is an integratedagreement containing the entire understanding amongthe Parties regarding the matters expressly addressedherein and, except as set forth in this SettlementAgreement, no representations, warranties or promiseshave been made or relied upon by the Parties to thisSettlement Agreement. This Settlement Agreementshall prevail over prior communications and agreementsbetween the parties or their representatives.


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17. Use of Singular and Plural

For the purposes of this Agreement, unless thecontext otherwise requires, words in the singularinclude words in the plural and vice versa.

18. Governing Law and Continuing Jurisdiction

Except to the e~:tent governed by the BankruptcyCode and interpreted in accordance therewith, thisSettlement Agreement shall be governed by and

construed in accordance with the laws of the State ofNew York. The United States Bankruptcy Court for theSouthern District of New York shall have continuing andexclusive jurisdiction over this Settlement Agreementand the Parties in respect of their relations hereunder.

19. Best Efforts

All Parties will use their best efforts to obtain theoutcomes sought by this Settlement Agreement, whichshall include joint motion by Travelers and the

Settlement Counsel to obtain, a Final Order approvingthis Settlement Agreement and entry of the SettlementApproval and Clarifying Order containing prohibitionsagainst Claims at least as broad as those contained inExhibit A, provided, however, that nothing containedherein shall be construed to require, and the partiesagree, that Travelers shall not be required, to disclosethe identity of any of its policyholders to any Person,including but not limited to Settlement Counsel or theDirect Action Settlement Fund Administrator or thearbitrator.


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20. orrespondence

Each of the Parties shall be providedwith notice ofany dispute concerning this Settlement Agreement orits interpretation or effect. Any such notice orcommunications shall be addressed and sent in writing,by registered or certified mail, return receipt requested,to the attention of the persons identified below (or asthe Parties may subsequently direct in writing):

(1) If to Settlement Counsel to:

Motley, Rice LLC28 Bridgeside Blvd.P.O. Box 1792Mt. Pleasant, S.C. 29465Attn: Joseph E Rice, Esq.

and to

Baron &Budd, P.C.3102 Oak Lawn Avenue,

Suite 110 0Dallas, TX 7521 9Attn: Alan B. Rich, Esq.

and to

Thornton & Naumes LLP100 Summer Street, 3 rd FloorBo ston, MA 02 110Attn: Michael P. Thornton, Esq.


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(2) If to

36a

Appendix D

and to

Law Office of LawrenceMadeksho8866 Gulf Freeway, Suite 440Houston, TX 77017Attn: Lawrence Madeksho, Esq.

and to

Wilentz, Goldman & Spitzer, PA

90 Woodbridge Center DriveWoodbridge, NJ 07095Attn: Christopher M. Placitella, Esq.

and to

Galiher, DeRobertis NakamuraTakitani610 Ward Avenue, Suite 200Honolulu, HI 96814-33 08Attn: Gary O. Galiher, Esq.

Travelers:

General Counsel - EnvironmentalLitigation GroupTravelers Indemnity CompanyOne Tower SquareHartford, CT 06183-6016

Ono


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(3) If to the Direct Action Settlement FundAdministrator:

To be provided upon appointment.

IN WITNESS WHEREOF, the Parties, by theirduly authorized representatives, affix their signatureshereto and direct Travelers counsel to deposit a copythereof with the Mediator, whereupon it shall becomeeffective:

THE TRAVELERS INDEMNITY COMPANY,TRAVELERS CASUALTY AND SURETY ANDTRAV:ELERS PROPERTY CASUALTY CORP.

By: /s/

Name:

Title:

Date:

SETTLEMENT COUNSEL

By: /s/

Name:

Date:

Witness: /s/

Witness: /s/

Joseph E Rice, Esquire of Motley, Rice LLC


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SETTLEMENT COUNSEL

By: /s/ Witness: /s/

Name: Alan Rich, Esquire of Baron & Budd, P.C.

Date:

SETTLEMENT COUNSEL


Name: Michael P. ~Phornton, Esquire of Thornton &Naumes LLP

Date:

SETTLEMENT COUNSEL


Name: Lawrence Madeksho, Esquire of Law Offices of

Lawrence Madeksho

Date:

SETTLEMENT COUNSEL


Name: Christopher M. Placitella, Esq., Esquire ofWilentz, Goldman & Spitzer, PA

Date:


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SETTLEMENT COUNSELBy: /s/ Witness: /s/

Name: Gary Galiher, Esquire of Galiher, DeRobertisNakamura Ono Takitani

Date:


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Appendix E

WHEREAS, Travelers believes that all direct actionclaims, including but not limited to the Common LawDirect Action Claims, whether sounding in tort orcontract or brought pursuant to statute, are barred bythe Confirmation Order and Insurance SettlementOrder (as defined herein) entered by the BankruptcyCourt in In re Johns-Manville Corp.;

WHEREAS, the Parties (as defined herein) nowdeem it to be in their best interests to settle and fullyand finally to compromise in accordance with the terms

of this Settlement Agreement all disputes, issues andobjections that now exist or might exist in the futurebetween and among them concerning the Common LawDirect Action Claims;


1. Definition

(a) "Bankruptcy Code" shall mean Title 11 of theUnited States Code, 11 U.S.C. §§ 101 et seq., asamended from time to time.

(b) "Bankruptcy Court" shall mean the UnitedStates Bankruptcy Court for the Southern District ofNew York.


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(c) "Claims" shall mean the assertion of any rightor remedy including, without limitation, all past, presentand future claims, counts, cross-complaints,counterclaims, affir:aaative defenses, writs, demands,inquiries, requests,, suits, lawsuits, rights, actions,damages, liens, contracts, policies, indemnity or defenseobligations, agreements, promises, undertakings, claimsfor indemnity, contribution or the like, liabilities,judgments, settleInents, losses, costs, expenses,administrative proceedings, directives, governmentalactions or other causes of action or orders, whether

known or unknown, asserted or unasserted, manifestedor unmanifested, secured or unsecured, matured orunmatured, disputed or undisputed, foreseen orunforeseen, fixed or contingent, direct or indirect,whether in law, eq:uity, bankruptcy, admiralty orotherwise, relating in any way whatsoever to bodilyinjuries, death or damages of any kind or nature to aPerson (including, but not limited to bodily injury,illness, wrongful death, mental anguish, emotionaldistress, medical monitoring, fear of bodily injury illnessor death, loss of consortium (including spousal,

children’s or parental consortium), loss of love, societyand companionship, attorneys’ fees, expenses, andpenalties or recompense) arising from or relating in anyway to asbestos, exposure to asbestos, knowledge aboutasbestos or the ha:adling, defense, trial, appeal orsettlement of asbestos-related claims or theparticipation in the handling, defense, trial, appeal orsettlement of asbestos-related claims, further includingbut not limited to Claims for economic damages,consequential damages and punitive damages.


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(d) "Confirmation Order" shall mean the December22, 1986 Order of the United States Bankruptcy Courtfor the Southern District of New York in In re Johns-Manville Corp., 82 B 11656 , 82B 11657, 82B 1166 0, 82 B11661, 82 B 11665 through 82B 11673 inclusive, 82 B11675, 82 B 11676 (BRL).

(e) "Common Law Direct Action Claims" shall mean(i) the Claims by Persons listed on Exhibit C hereto and(ii) all. other Claims by Persons, who have or whootherwise could assert Claims under the common law,

statutes, laws or regulations of the United States or anystate or territory thereof, against Travelers that directlyor indirectly are based upon, arise out of or relate toTravelers insurance relationship with Johns Manvilleand its affiliates ("Manville") or Travelers knowledgeor alleged knowledge concerning the hazards ofasbestos, including but not limited to, any and all claimsor demands relating to asbestos that now or in thefuture allege unfair competition, unfair or deceptiveclaims handling or trade practices; bad faith; failure towarn, conspiracy, concert of action, breach of any duty

to disclose information, negligent undertaking,negligent or intentional misrepresentation, spoliationof evidence, negligent inspection or any theory or causeof action similar to the foregoing, under any statute orcommon law; provided, however that Common LawDirect Action Claims shall not include Claims againstTravelers by policyholders other than Manville (orassignees of such policyholders) for insurance proceedsor other obligations arising under any policy of insuranceprovided by Travelers to a policyholder other than


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Manville; and provided further that Common Law DirectAction Claims shall exclude Statutory Direct ActionClaims as that term is defined in the Statutory DirectAction Settlement Agreement dated March 8, 2004, asamended March 26, 2004.

(f) "Common Law Direct Action Settlement Fund"shall mean the fund created pursuant to Paragraph 4 ofthis Settlement Agreement in settlement of CommonLaw Direct Action Claims.

(g) "Common Law Direct Action Settlement FundAdministrator" shall, mean the Person mutually agreedupon by the Parties pursuant to Paragraph 4(c) who willadminister the Common Law Direct Action SettlementFend.

(h) "Entity" means any corporation, limitedliabilityentity, partnership, association, trust and any otherentity (including any estate, guardian or beneficiarythereof), or organization, including, without limitation,any federal, state or local government, or quasi-

governmental body c,r political subdivision, department,agency or instrumerttality thereof, or any Person.

(i) "Execution Date" shall mean first date on whichall the Signatories hereto have fully executed thisSettlement Agreement

(j) "Final Order" shall mean an order as to whichthe time to appeal, petition for certiorari, motion forreargument or rehearing has expired and as to which


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no appeal, petition for certiorari or other proceedingfor reargument or rehearing shall be pending or as towhich any right to appeal, petition for certiorari ormotion for argument or rehearing shall have beenwaived in writing by the Entity possessing such rightor in the event of an appeal, writ of certiorari or motionfor reargument or rehearing has been sought, suchorder shall have been affirmed by the highest court towhich such order was appealed or certiorari has beendenied and the time to take any further appeal orpetition for certiorari shall have expired.

(k) "Insurance Settlement Order" shall mean theDecember 18, 1986 Order of the United StatesBankruptcy Court for the Southern District of NewYorkentered in In re Johns-Manville Corp., 82 B 11656, 82B 11657, 82 B 11660, 82 B 11661, 82 B 11665 through82B 1116 73 inclusive, 82 B 11675, 82 B 116 76 (BRL).

(1) "Mediator" means the Honorable Mario M.Cuomo.

(m) "Parties" shall mean all Persons identified onExhibit C, Settlement Counsel, and Travelers.

(n) "Pending Common Law Direct Actions" shallmean, the lawsuits and any similar suit filed againstTravellers by Persons listed on Exhibit C.

(o) "Person" shall mean any individual or group ofindividuals, their heirs, executors, representatives,administrators, estates, agents, successors and assigns.


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(p) "Settlement Agreement" means this agreementand shall include any amendment as provided hereinand the exhibits hereto.

(q) "Settlement.Amount" shall mean the aggregateamount of the payment obligations set forth inParagraph 3, as it may be reduced pursuant toParagraph 5(b).

(r) "Settlement Counsel" shall mean (i) Law Officesof Lawrence Madek~,~ho LLC; (ii) Law Offices of Bruce

Carter (iii) Bevan & Associates LPA Inc.; and (iv) TheBogdan Law Firm as representatives and counsel ofPersons listed on Exhibit C.

(s) Travelers shall mean: The TravelersIndemnity Company, Travelers Casualty and SuretyCompany, Travelers Property Casualty Corp., CitigroupInc., The Travelers Insurance Company, Travelers Lifeand Annuity Company, and each of their respectivedirect or indirect parents, subsidiaries and sistercompanies i.e., Entities that are directly or indirectly

owned or controlled by a common parent or holdingcompany), as well as each of their respectivepredecessors, successors, assigns, officers and directors(for purposes of this section (t), all of the Entitiesdescribed above are collectively referred to as"Released Parties"). "Travelers" shall also include futureparents, subsidiaries and sister companies of theReleased Parties (or successors of any of the foregoing),provided, however, that nothing in this SettlementAgreement shall be construed to release The St. Paul


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Appendix E

Companies (as constituted prior to April 1, 2004) or anycompany first acquiring, acquired by or merging withany of the Released Parties on or after the ExecutionDate from any liability for such Entity’s own conductand not for conduct relating to or arising from acts,omissions, conduct or issuance of insurance by theReleased Parties. "Travelers" shall also include pastparents, subsidiaries or sister companies of any of theReleased Parties (or successors of any of the foregoing),provided however that nothing in this SettlementAgreement shall be construed to release any such past

parent, subsidiary or sister company that no longer is aparent, subsidiary or sister company of any of theReleased Parties as of the Execution Date for their ownconduct after its ownership of or by or affiliation withany of the Released Parties ended and not relating toor arising from acts, omissions, conduct or issuance ofinsurance by any of the Released Parties. By way ofexample, "Travelers" shall not include Aetna Inc., orany of its predecessors in interest, for its own conductpost-dating April 1996 relating to or arising from acts,omissions, conduct or issuance of insurance and not

relating to or arising from acts, omissions, conduct orissuance of insurance by any of the Released Parties.


Travelers’ obligations hereunder, other than thepayment set forth in Paragraph 3(b), are subject to andmade expressly contingent upon the satisfaction of eachof the following conditions precedent:


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Appendix E

(a) Entry of an order or orders of the BankruptcyCourt, issued pursuant to the Confirmation Order, theInsurance Settlement Order and/or Sections 105(a),524(g), 1141 and 1142 of the Bankruptcy Code and theCourt’s inherent powers, substantially in the formattached hereto as Exhibit A, upon notice proceduresreasonably satisfactory to Travelers, which order shallhave become a Final Order.

(b) Entry of an Order approving this SettlementAgreement, which Order shall have become a Final

Order, with notice of the hearing on the motion toapprove this Settlement Agreement and the Orderdescribed in Section 2(a) above, in a form and manneracceptable to Travelers and as approved by theBankruptcy Court.

(c) Execution and delivery into escrow, within sixty(60) days of approval by the Bankruptcy Court of thisSettlement Agreement, of no fewer than fourteenthousand (14,000) general releases, substantially in theform attached heretc, as Exhibit B, as further described

in Paragraph 5 of th is Settlement Agreement.

3. Payment of Settlement Amount

(a) Upon satisfaction of each of the conditions setforth in Paragraph 2 hereof and subject to the provisionsof Paragraph 5(b) hereof, Travelers Indemnity Companyshall pay within 30 days:


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Appendix E

(1) Seventy million dollars ($70,000,000)to the Common Law Direct Action Settlementl~nd; and

(2) Tw enty million dollars ($20,000,00 0) o fattorneys’ fees to be paid as follows:

(b) The Travelers Indemnity Company shall pay thecosts associated with the formation of the Common LawDirect Action Settlement Fund (including but not limitedto the payment of the Administrator, of all reasonable,

necessary fees and expenses in carrying out his/herduties, and of all professional and administrativepersonnel reasonably required to carry out his/herduties) subject to a cap of four million dollars($4,000,000).

(c) Notwithstanding anything else in this SettlementAgreement to the contrary and separate and apart fromany other terms and conditions set forth herein, the non-occurrence or failure to satisfy any of the conditionsprecedent set forth in Paragraph 2 shall relieve

Travelers from any obligation whatsoever under thisSettlement Agreement, including, but not limited to, theobligation to pay any portion of the Settlement Amountwith the exception of the payments described inParagraph 3(b) above.

(d) The Settlement Amount shall be a full and finalsettlement. The Parties agree and jointly represent thatthe Settlement Amount to be paid by The TravelersIndemnity Company and/or Travelers Casualty and


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Appendix E

Surety Company pursuant to this SettlementAgreement constitutes fair and reasonableconsideration. The general releases delivered hereunderare final and non-revocable regardless of any ruling byany court after this Settlement Agreement has beenapproved by a Final Order.

4. Common Law Direct Action Settlement Fund

(a) Settlement Counsel shall create a Common LawDirect Action Settlement Fund into which The Travelers

Indemnity Company and/or Travelers Casualty andSurety Company shall make payment in accordance withand subject to the terms of this Settlement Agreement.

(b) The Common Law Direct Action SettlementFund Administrator shall administer and pay QualifyingClaims in accordance with the procedures to be approvedby the Court.

(c) The Commo~a Law Direct Action SettlementFund shall be admini~stered by the Common Law Direct

Action Settlement Fund Administrator, who shall be aPerson mutually agreed upon by the Parties andapproved by the Bankruptcy Court.

5. Releases by Clm mants

Any Person who receives payment from the CommonLaw Direct Action Sel;tlement Fund shall sign and deliverto Travelers a general release, in substantially the formattached hereto as Exhibit B. To the extent applicable


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Appendix E

state law imposes any additional requirements in orderto enforce in whole or in part the general releasescontemplated by this Settlement Agreement,Settlement Counsel agree to take all steps necessary toobtaiw such general releases contemplated by thisSettlement Agreement in a form that conforms withapplicable state law.

6. Stays and Dismissals With Prejudice of Lawsuits

(a) Upon execution of this Settlement Agreement,

Settlement Counsel on behalf of all plaintiffs identifiedon Exhibit C agree to continue to stay the PendingCommon Law Direct Action Claims as against Travelerspending a Final Order approving this SettlementAgreement.

(b) Upon the Order approving this SettlementAgreement becoming a Final Order and the orderdescribed in Section 2(a) containing prohibitions againstClaims at least as broad as those contained in Exhibit Abecoming a Final Order, plaintiffs shall promptly dismiss

with prejudice as against Travelers the PendingCommon Law Direct Actions.

7. Attorneys’Fee

Travelers agrees not to challenge the individualcontingency fee arrangements of any SettlementCounsel who is a signatory to this SettlementAgreement.


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8. Not Evidentiar~ and Not an Admission

The Parties agree that no part of this SettlementAgreement may be used in any proceeding as evidenceof their respective rights, duties or obligations;provided, however, t]~at this restriction shall not applyto any proceeding in connection with or related to theinterpretation, validi:ty, enforcement or breach of thisSettlement Agreement. This Settlement Agreement isnot intended to be nor shall it be construed as anadmission of liability by Travelers and should not be

construed to be a concession or admission that theDirect Actions have any factual or legal merit or thatthe Common Law Direct Action Claims are not in anyway subject to the Manville Confirmation Order or theManville Insurance Settlement Order. Travelersexpressly states thal~ the Common Law Direct ActionClaims lack legal an,] factual merit and are barred bythe Manville Confirmation Order and the ManvilleSettlement Order. This Settlement Agreement isnevertheless made in settlement of disputed claims andthis Settlement Agreement shall not be used in any court

or dispute resolutio~a proceeding to create, prove orinterpret any rights c.r obligations of Travelers. Withoutlimiting the foregoing, this Settlement Agreement shaltbe deemed to fall within the protection affordedcompromises and offers to compromise by Rule 408 ofthe Federal Rules of Evidence and corresponding staterules.


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9. Confidentiality

The Parties agree that, except by order of court ofcompetent jurisdiction and upon notice to all Parties,all communications (written or oral)in connection withthe settlement discussions leading to this SettlementAgreement or with respect to any of the draft terms orconditions of this Settlement Agreement shall remainconfidential, and that the Parties may not seek discoveryinto, or seek to introduce at any trial or proceeding,

pending and future, evidence of such communications.

lO. Successors

This Settlement Agreement shall not be construedto inure to the benefit of any Entity other than Travelers.

11 mendments

No amendments or variations of the terms of thisSettlement Agreement shall be valid unless made in

writing and signed by the Settlement Counsel andTravelers and approved by the Bankruptcy Court.

12. Execution

This Settlement Agreement may be executed induplicate counterparts, each of which shall be deemedan original. A facsimile or telecopy of a Party’s signaturehereto shall be as valid, binding, and enforceable as theoriginal thereof.


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13. Representation of Authority

The individuals signing this Settlement Agreementhereby represent to each other, the Mediator and theBankruptcy Court that they are authorized to enter intothis Settlement Agreement on behalf of all Personswhom they purport to represent and to bind theirprincipals to this Settlement Agreement.

14. Construction

This Settlement Agreement is not a contract ofinsurance and the Parties agree that any special rulesof interpretation or construction of insurance contractsshall not apply. This Settlement Agreement is theproduct of arm’s length negotiations between andamong the Parties and counsel in a mediation orderedby the Bankruptcy Court under the auspices of theHonorable Mario M. Cuomo. Each of the Parties heretohas participated in the drafting of this SettlementAgreement. Therefore, it is the intent of the Parties thatno part of this Settlement Agreement shall be

presumptively construed against any other Partybecause of the iderLtity of the drafter or becauseTravelers is an insurance company.

15. Headings

Paragraph headings contained herein are forpurposes of organization only and shall not constitute apart of the terms of this Settlement Agreement.


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Appendix E

16. Entire AgreementThis Settlement Agreement is an integrated

agreement containing the entire understanding amongthe Parties regarding the matters expressly addressedherein and, except as set forth in this SettlementAgreement, no representations, warranties or promiseshave been made or relied upon by the Parties to thisSettlement Agreement. This Settlement Agreementshall prevail over prior communications and agreementsbetween the Parties or their representatives.

17. Use of Singular and Plural

For the purposes of this Agreement, unless thecontext otherwise requires, words in the singularinclude words in the plural and vice versa.

18. Governing Law and Continuing Jurisdiction

Except to the extent governed by the BankruptcyCode and interpreted in accordance therewith, this

Settlement Agreement shall be governed by andconstrued in accordance with the laws of the State ofNew York, The United States Bankruptcy Court for theSouthern District of New York shall have continuing andexclusive jurisdiction over this Settlement Agreementand t]he Parties in respect of their relations hereunder.


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19. Best Efforts

All Parties will use their best efforts to obtain theoutcomes sought by this Settlement Agreement, whichshall include joint motion by Travelers and theSettlement Counsel to obtain, upon an evidentiaryhearing, a Final Order approving this SettlementAgreement and entry of the order described in Section2(a) containing prohibitions against Claims at least asbroad as those contaiined in Exhibit A.

20. orrespondence

Each of the Parties shall be provided with notice ofany dispute concerning this Settlement Agreement orits interpretation or effect. Any such notice orcommunications shall be addressed and sent in writing,by registered or certified mail, return receipt requested,to the attention of the persons identified below (or asthe Parties may subsequently direct in writing):

(1) If to Settlement Counsel to:

Lawrence Madeksho, Esq.THE MADEKSHO LAW FIRM PLLC8866 Gulf Freeway, Suite 440Houston, TX 77017F acsimile: (713) 910-02 50Counsel For Texas Plaintiffs

and to


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Appendix E

Eric Bogdan, Esq.THE BOGDAN LAW FIRM 8866Gulf Freeway, Suits 515Houston, TX 77017F acsimile: (713) 378 -9379Counsel For Texas Plaintiffs

Bruce Carter, Esq.LAW OFFICE OF BRUCE CARTER54 58 Yosem ite Dr.F airfield, Ohio 4 5014F acsimile: (513) 829 -457 9Counsel For Ohio Plaintiffs

Thomas W. Bevan, Esq.BEVAN & ASSOCIATES, LPA10360 Northfield RoadNorthfield, Ohio 44067F acsimile: (330) 46 7-4493

(2) If to Travelers:

General Counsel - EnvironmentalLitigation GroupTravelers Indemnity CompanyOne Tower SquareHartford, CT 06183-6016

(3) If to the Common Law Direct Action SettlementFund Administrator:

To be provided upon appointment.


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21. Representation Concerning Clients

Settlement Counsel represent only the clients listedon Exhibit C hereto. This Settlement Agreement shallnot be construed as .an undertaking or representationon behalf of anyone not identified on Exhibit C.Settlement Counsel agree to include in Exhibit C allexisting clients of Settlement Counsel with pending orpotential Common Law Direct Action Claims as well asexisting clients of the following firms: (i) Law Offices ofR. Bryan Nace; (ii) Richarson, Patrick, Westbrook &Brickman, LLC; (iii) Martin & Jones; (iv) The LanierLaw Firm and (v) The Simmons Firm LLC, with pendingor potential Common Law Direct Action Claims.

22. Counterparts

This Agreement maybe signed in counterparts, eachof which shall be an original and all of which togethershall constitute one and the same instrument.

IN WITNESS WHEREOF, the Parties, by theirduly authorized representatives, affix their signatureshereto and direct Travelers counsel to deposit a copythereof with the Mediator, whereupon it shall becomeeffective:

THE TRAVELERS INDEMNITY COMPANY,TRAVELERS CASUALTY AND SURETY ANDTRAVELERS PROPERTY CASUALTY CORP.

By: s/ Timothy H. YessmanName: Timothy H. ~essmanTitle: Executive Vice-President

Witness: s/ [illegible]


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CLAIMANTS’ REPRESENTATIVE

By.. s/Lawrence MadekshoName: Lawrence MadekshoDate: 5-25-04

W itness:s/[Eric Bog dan]


By: s/ Eric BogdanName: Eric BogdanDate: May 25, 2004

Witness: s/ [illegible]


By: s/ Bruce CarterName: Bruce CarterDate: May 25, 2004

W itness:s/[Eric Bog dan]


By: Witness:Name:Date:




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Appendix E




By: s/ Thomas W. Bevan Witness: s/ [illegible]Name: Thomas W. Bevan

for Bevan & Assoc:[ates, LPA, Inc.

Date: May 25, 2004




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APPENDIX F HAWAII DIRECT ACTIONSETTLEMENT AGREEMENT

SETTLEMENT AGREEMENT

SETTLEMENT AGREEMENT (as definedherein), dated as of May 21, 2004, made and enteredinto by and between (i) the Hawaii Direct ActionSettlement Counsel (as defined herein) on behalf of allPersons (as defined herein) who have asserted HawaiiDirect Action Claims (as defined herein); and (ii) TheTravelers Indemnity Company and Travelers Casualtyand Surety Company (formerly known as The AetnaCasualty and Surety Company):

WHEREAS, Travelers (as defined herein) conteststhe allegations of the Hawaii Direct Action Claims andthe validity of the threatened lawsuits and any liabilitythereunder;

WHEREAS, the Parties (as defined herein) nowdeem it to be in their best interests to settle and fullyand finally compromise in accordance with the terms ofthis Settlement Agreement all disputes, issues andobjections that now exist or might exist in the futurebetween and among them concerning the Hawaii DirectAction Claims;



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1. Definitions

(a) "Bankruptcy Code" shall mean Title 11 of theUnited States Code, 11 U.S.C. §§ 101 et seq, as amendedfrom time to time.

(b) "Bankrup~cy Court" shall mean the UnitedStates Bankruptcy Court for the Southern District ofNew York.

(c) "Claims" shall mean the assertion of any rightor remedy including, without limitation, all past, presentand future claims, counts, cross-complaints,counterclaims, affirmative defenses, writs, demands,inquiries, requests, suits, lawsuits, rights, actions,damages, liens, contracts, policies, indemnity or defenseobligations, agreements, promises, undertakings, claimsfor indemnity, contribution or the like, liabilities,judgments, settlements, losses, costs, expenses,administrative proceedings, directives, governmentalactions or other causes of action or orders, whetherknown or unknown, asserted or unasserted, manifested

or unmanifested, secured or unsecured, matured orunmatured, disputed or undisputed, foreseen orunforeseen, fixed or’ contingent, direct or indirect,whether in law, equity, bankruptcy, admiralty orotherwise, relating in any way whatsoever to bodilyinjuries, death or da~nages of any kind or nature to aPerson (including, but not limited to bodily injury,illness, wrongful death, mental anguish, emotionaldistress, medical monitoring, fear of bodily injury illnessor death, less of consortium (including spousal,


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children’s or parental consortium), loss of love, societyand companionship, attorneys’ fees, expenses, andpenalties or recompense) arising from or relating in anyway to asbestos, exposure to asbestos, knowledge aboutasbestos or the handling, defense, trial, appeal orsettlement of asbestos-related claim the participationin the handling, defense, trial, appeal or settlement ofasbestos-related claims or the participation in thehandling, defense, trial, appeal or settlement ofasbestos-related claims, further including but notlimited to claims for economic damages, consequential

damages and punitive damages. "Claims" shall notinclude claims for damages to real property as a resultof the presence of asbestos in such real property,provided that if any such claim includes allegations thatthe presence of asbestos does or may cease injury toPersons in addition to real property damage, such claimshall be included in the definition of Claim herein butonly to the extent such claim seeks damages for any suchinjury to such Person.

(d) "Confirmation Order" shall mean theDecember 22, 1986 Order of the United StatesBankruptcy Court for the Southern District of New Yorkin In re Johns-Manville Corp., 82 B 11656, 82 B 11657,82 B 11660, 82 B 1166 1, 82 B 11665 through 82B 11673inclusive, 82 B 11675, 82 B 116 76 (BRL).

(e) "Entity" means any corporation, limitedliability entity, partnership, association, trust and anyother entity (including any estate, guardian orbeneficiary thereof), or organization, including, without


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limitation, any federal, state or local government, orquasi-governmental body or political subdivision,department, agency ,or instrumentality thereof, or anyPerson.

(f) "Execution Date" shall mean the earliest dateon which all the Signatories hereto have fully executedthis Hawaii Settlement Agreement.

(g) "Final 0rdler" shall mean an order as to whichthe time to appeal, petition for certiorari, motion forreargument or rehearing has expired and as to whichno appeal, petition for certiorari or other proceedingfor reargument or rehearing shall be pending or as towhich any right to appeal, petition for certiorari ormotion for reargument or rehearing shall have beenwaived in writing by the Entity possessing such rightor in the event of an appeal, writ of certiorari or motionfor reargument or rehearing has been sought, suchorder shall have been affirmed by the highest court towhich such order wa’.s appealed or certiorari has beendenied and the time to take any further appeal orpetition for certiorari, shall have expired.

(h) "Hawaii D:[rect Action Claims" shall mean thefollowing: (i) the putative class action lawsuits captionedLorenzo Baclaan, et al. v. Combustion EngineeringInc., et al., Case No. 03-00325, United States DistrictCourt for the District of Hawaii, and Geo rge Toro, et al.v. Combustion Engineering, Inc., et al., Case N o. 03-00326, United States District Court for the District ofHawaii; (ii) the lawsuit captioned Theodore K. Hopkins,


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et al. v. Combustion Engineering, Inc., et al., Case No .03-00401, United States District Court for the Districtof Hawaii; and (iii) any other Claim against Travelers,whether under a statute, common law or otherwise,asserted or unasserted, arising from or relating toTravellers’ alleged acts, omissions or involvement of anytype in the handling, defense, trial, appeal or settlementof any Claim by any Person against CombustionEngineering, Inc. (and its past, present or futureparents, subsidiaries, divisions or affiliates)("Combustion Engineering") filed in any state or federal

Hawaiian court and resolved prior to the ExecutionDate.

(i) "Hawaii Direct Action Settlement Counsel"shall mean Gary O. Galiher, Esq., and Galiher,DeRobertis Nakamura Ono Takitani, the law firmserving as representative and counsel of Persons whohave asserted a Hawaii Direct Action Claim.

(j) "Hawaii Direct Action Settlement Fund" shallmean the fund created pursuant to Paragraph 4 of this

Hawaii Settlement Agreement in settlement of HawaiiDirect Action Claims.

(k) "Hawaii Direct Action Settlement FundAdministrator" shall mean the Person selected andapproved as described in Paragraph 4(c) who willadminister the Hawaii Direct Action Settlement Fund.

(1) "Hawaii Settlement Agreement" means thisagreement and the exhibits thereto and shall includeany amendment as provided herein.


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(m) "Insurance Settlement Order" shall meanthe December 18, 1986 Order of the United StatesBankruptcy Court for the Southern District of New Yorkentered in In re Johns-Manville Corp., 82 B 11656,82 B 11657, 82 B 11660, 82 B 11661, 82 B 11665 through82 B 114573 inclusive, 82 B 11675, 82 B 11676 (BRL).

(n) "Mediator" means the Honorable MarioCuomo or such successor mediator as maybe appointedby the Bankruptcy Court.

(o) "Parties" shall mean all Persons who haveasserted a Hawaii Direct Action Claim, Hawaii DirectAction Settlement Counsel, and Travelers.

(p) "Person" shall mean any individual, class orgroup of individuals, their heirs, executors,representatives, administrators, estates, agents,successors and assigns.

(q) "Settlement Amount" shall mean theaggregate amount of the payment obligations set forth

in Paragraph 3, as it may be reduced pursuant toParagraph 5(b).

(r) "Settlement Approval and Clarifying Order"shall mean an order or orders of the Bankruptcy Court,issued pursuant to the Confirmation Order, theInsurance Settlement Order and/or Sections 105(a),524(g), 1141 and 1142 of the Bankruptcy Code and theCourt’s inherent powers.


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(s) "Statutory Direct Action Claims" shall havethe definition provided in the Statutory Direct ActionSettlement Agreement.

(t) Statutory Direct Action SettlementAgreement" means the agreement executed on March8, 2004 and as amended March 24, 2004 between counselto Persons asserting Statutory Direct Action Claims andTravelers.

(u) "Travelers" shall mean: The Travelers

Indemnity Company, Travelers Casualty and SuretyCompany, Travelers Property Casualty Corp., CitigroupInc., The Travelers Insurance Company, Travelers Lifeand Annuity Company, and each of their respectivedirect or indirect, parents, subsidiaries and sistercompanies i.e., Entities that are directly or indirectlyowned or controlled by a common parent or holdingcompany), as well as each of their respectivepredecessors, successors, assigns, officers and directors(for purposes of this section (u), all of the Entitiesdescribed above are collectively referred to as

"Released Parties"). "Travelers" shall also include futureparents, subsidiaries and sister companies of theReleased Parties (or successors of any of the foregoing).Notwithstanding the above, nothing in this HawaiiSettlement Agreement shall be construed to release St.Paul Travelers Companies, Inc. in its capacity assuccessor to The St. Paul Companies, or any othercompany first acquiring, acquired by or merging withany of the Released Parties on or after November 19,2003 from any liability for such Entity’s own conduct


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and not for conduct relating to or arising from acts,omissions, conduct or issuance of insurance by theReleased Parties. "Travelers" shall also include pastparents, subsidiaries or sister companies of any of theReleased Parties (or successors of any of the foregoing),provided however that. nothing in this HawaiiSettlement Agreement shall be construed to release anysuch past parent, subsidiary or sister company that nolonger is a parent, subsidiary or sister company of anyof the Released Parties as of November 19, 2003 for itsown conduct after its ownership of or by or affiliationwith any of the Released Parties ended and not relatingto or arising from acts, omissions, conduct or issuanceof insurance by any c.f the Released Parties. By way ofexample, "Travelers" shall not include Aetna Inc., orany of its predecessors in interest, for its own conductpost-dating April 1996 relating to or arising front acts,omissions, conduct c,r issuance of insurance and notrelating to or arising from acts, omissions, conduct orissuance of insurance by any of the Released Parties.


Travelers’ obligations hereunder are subject to andmade expressly contingent upon the satisfaction of eachof the following conditions precedent. Notwithstandinganything else in this Hawaii Settlement Agreement tothe contrary and separate and apart from any otherterms and conditions set forth herein, the non-occurrence or failure to satisfy any of the conditionsprecedent set forth in this Paragraph 2 shalI relieveTravelers from any obligation whatsoever under this


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Hawaii Settlement Agreement, including, but not limitedto, the obligation to pay any portion of the SettlementAmount.

(a) Entry of an order or orders, which order ororders each shall have become a Final Offer, approvingthis Hawaii Settlement Agreement and enjoining allHawaii Direct Action Claims against Travelers, and theentry of which shall have been preceded by notice ofthe hearing on the motion to approve this HawaiiSettlement Agreement in a form and manner acceptable

to the Parties and as approved by the Bankruptcy Court.Such notice, which may include publication notice, shallreasonably put Persons on notice of this HawaiiSettlement Agreement and be provided at least toclaimants who, according to the records of ConnecticutValley Claim Services, filed and/or resolved claimsagainst Combustion Engineering prior to the ExecutionDate which claims were asserted in any state or federalcourt in Hawaii.

(b) Entry of (i) a Settlement Approved Order,and (ii) a Clarifying Order, as those terms are defined inthe Statutory Direct Action Settlement Agreement,which orders shall have become a Final 0rder(s).

(c) Upon execution of this Hawaii SettlementAgreement, Hawaii Direct Action Settlement Counselon behalf of all plaintiffs and putative class members inthe Hawaii Direct Action Claims agree to continue tostay those actions as against Travelers pending a FinalOrder approving this Hawaii Settlement Agreement.

travelers v bailey -- chubb joint appendix -- us sup ct

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