Exhibit 2.4
SUCCESS FEE AGREEMENT
Agreement dated as of ___________, 200_, by and between [XYZ, LLC] (the
"Service Provider") and the Liquidating Trust for Highlands Insurance Group,
Inc. and certain of its subsidiary companies (collectively, "Highlands"),
established pursuant to that certain Liquidating Trust Agreement between
Highlands and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇▇ as Liquidating Trustee, dated ____________,
2002 (the "Liquidating Trust Agreement").
BACKGROUND. On ____________, the United States Bankruptcy Court for the
District of Delaware entered an order which, inter alia, confirmed the Joint
Plan of Reorganization of Highlands under Chapter 11 of the United States
Bankruptcy Code (the "Plan"), and approved the Liquidating Trust Agreement.
Section 5.11 of the Plan and section 7.3 of the Liquidating Trust Agreement each
provide that, on or after the Effective Date of the Plan, the Liquidating Trust
and the Service Provider will enter into a Success Fee Agreement. This Agreement
is the agreement referred to in those sections.
NOW, THEREFORE, in consideration of the promises and covenants set forth
herein, and intending to be legally bound hereby, the parties to this Agreement
hereby agree as follows:
1. Definitions.
(a) Except with respect to terms defined herein, capitalized terms
contained herein shall have the meanings ascribed to them in the Plan.
(b) "Agreement" means this Success Fee Agreement.
(c) "Milestone One" means distributions by the Liquidating Trust to
holders of Class A Trust Units totaling in the aggregate an amount equal to
fifty percent (50%) of the face amount of such Class A Trust Units outstanding
on the Effective Date.
(d) "Milestone Two" means distributions by the Liquidating Trust to
holders of Class A Trust Units totaling in the aggregate an amount equal to
seventy-five percent (75%) of the face amount of such Class A Trust Units
outstanding on the Effective Date.
(e) "Milestone Three" means distributions by the Liquidating Trust
to the holders of Class A Trust Units totaling in the aggregate an amount equal
to one hundred percent (100%) of the face amount of such Class A Trust Units
outstanding on the date of the last such distribution.
(f) "Milestone Four" means any distribution by the Liquidating Trust
to the holders of Class B Trust Units.
(g) "Milestone Five" means distributions by the Liquidating Trust to
the holders of Class A and B Trust Units totaling in the aggregate an amount
equal to one hundred percent (100%) of the face amount of such Class A and B
Trust Units outstanding on the date of the last such distribution.
2. Service Provider. The Service Provider shall, during the term of this
Agreement, provide management services to the Liquidating Trust with respect to
the liquidation of the Trust
Assets and the fulfillment of the Plan. Such services shall be provided in a
professional manner under the direction of the Managing Member of the Service
Provider, subject to the overall supervision of the Liquidating Trustee and the
Trust Advisory Board of the Liquidating Trust.
3. Term.
(a) This Agreement shall commence on the Effective Date and shall
continue until (i) the Liquidating Trust is terminated in accordance with its
provisions, or (ii) this Agreement is terminated in accordance with subparagraph
3(b) or 3(c), below.
(b) This Agreement may be terminated at any time by the Service
Provider giving the Liquidating Trust ninety (90) days prior notice of such
termination.
(c) This Agreement may be terminated by the Liquidating Trust for
cause (as defined in subparagraph 3(d), below), or without cause by giving the
Service Provider ninety (90) days prior notice of such termination.
(d) Cause shall mean the willful failure of the Service Provider to
perform the management services required hereunder; provided, however, that the
Service Provider shall be given notice (the "Initial Notice") by the Liquidating
Trust of its intention to assert that cause exists, specifying in reasonable
detail the nature and factual basis of the cause being asserted, and the Service
Provider shall have ninety (90) days after receipt of Initial Notice to correct
the deficiencies specified in such Notice. If, in the opinion of the Liquidating
Trust, the Service Provider shall fail to cure such deficiencies within the 90
day period, the Liquidating Trust may give the Service Provider a final notice
of cause (the "Final Notice"). Subject to the Service Provider's legal right to
dispute the Initial and/or Final Notice, cause, within the meaning of this
Agreement, shall be deemed to exist as of the receipt by the Service Provider of
the Final Notice.
4. Effect of Termination. If this Agreement shall be terminated by the
Service Provider pursuant to subparagraph 3(b) or by the Liquidating Trust for
cause pursuant to subparagraph 3(c), the Service Provider shall be entitled to
payment of all compensation due and payable or otherwise accrued hereunder
through the date of such termination. If this Agreement shall be terminated by
the Liquidating Trust pursuant to subparagraph 3(c) without cause, the Service
Provider shall be entitled to all compensation due and payable or otherwise
accrued hereunder through the date of such termination and any and all
compensation to which the Service Provider would otherwise have been entitled
under this Agreement, absent such termination, on account of any distributions
made by the Liquidating Trust to holders of Class A, B or C Trust units during
the three year period commencing on the day following the day of such
termination.
5. Compensation.
(a) The Service Provider shall be entitled to the following
compensation hereunder:
(i) Upon the achievement of the Milestone One, a payment of
$500,000;
(ii) Upon the achievement of Milestone Two, a payment of
$250,000;
(iii) Upon the achievement of Milestone Three, a payment of
$250,000;
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(iv) Upon any distribution constituting a part of Milestone
Four, a payment equal to five percent (5%) of such
distribution; and
(v) Upon the achievement of Milestone Five, a payment of $2
million.
(b) Each payment due to the Service Provider under subparagraph 5(a)
shall be made by the Liquidating Trust in immediately available funds promptly
upon the availability of funds in the Liquidating Trust to make such payment and
prior to any further distribution by the Liquidating Trust to holders of Trust
Units.
6. Representations and Warranties
(a) As an inducement to the Service Provider to enter into this
Agreement, the Liquidating Trust represents and warrants to the Service Provider
as follows:
(i) The Liquidating Trust is a trust duly organized and
validly existing under the laws of the State of Delaware
and has all requisite power to enter into this
Agreement.
(ii) Subject to receipt of the Confirmation Order for the
Plan, neither the execution and delivery of this
Agreement nor the consummation of the transactions
contemplated herein nor compliance by the Liquidating
Trust with any of the provisions hereof will: (i)
violate any order, writ, injunction, decree, law,
statute, rule or regulation applicable to the
Liquidating Trust; or (ii) require the consent,
approval, permission or other authorization of, or
qualification or filing with or notice to, any court,
arbitrator or other tribunal or any governmental,
administrative, regulatory or self-regulatory agency or
any other third party.
(iii) Subject to receipt of the Confirmation Order for the
Plan, this Agreement has been duly authorized, executed
and delivered by the Liquidating Trust and constitutes
the legal, valid and binding agreement of the
Liquidating Trust enforceable in accordance with its
terms.
(b) As an inducement to the Liquidating Trust to enter into this
Agreement, the Service Provider represents and warrants to the Liquidating Trust
as follows:
(i) The Service Provider is a limited liability company duly
organized and validly existing under the laws of the
jurisdiction in which it was organized and has all
requisite power to enter into this Agreement.
(ii) Subject to receipt of the Confirmation Order for the
Plan, neither the execution and delivery of this
Agreement nor the consummation of the transactions
contemplated herein nor compliance by the Service
Provider with any of the provisions hereof will: (i)
violate any order, writ, injunction, decree, law,
statute, rule or regulation applicable to it; or (ii)
require the consent, approval, permission or other
authorization of, or qualification or filing with or
notice to, any court, arbitrator or other
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tribunal or any governmental, administrative, regulatory
or self-regulatory agency or any other third party.
(iii) Subject to receipt of the Confirmation Order for the
Plan, this Agreement has been duly authorized, executed
and delivered by the Service Provider and constitutes
the legal, valid and binding agreement of the Service
Provider, enforceable in accordance with its terms.
7. Indemnification. The Liquidating Trust shall indemnify the Service
Provider, to the fullest extent permitted under the Liquidating Trust Agreement,
from and against any and all losses, claims, damages, liabilities, penalties,
judgment, costs, fees, expenses and disbursements, as and when incurred, of
investigating, preparing, defending or resolving any action, suit, proceeding or
investigation, directly or indirectly caused by, relating to, based upon,
arising out of or in connection with this Agreement or the performance by the
Service Provider of any services hereunder. Notwithstanding the forgoing, it is
expressly understood that (i) no indemnification shall be provided to the
Service Provider for conduct which constitutes willful misconduct or gross
neglect, which determination of willful misconduct or gross neglect shall be
made (A) in the first instance, (I) by a majority vote of the members of the
Trust Advisory Board who are not parties to such action, suit or proceeding, or
(II) if a majority vote of disinterested members of the Trust Advisory Board so
directs, by independent legal counsel in a written opinion, or (B) in the second
instance, notwithstanding any contrary determination in the specific case under
the preceding clause (i)(A) above or the absence of a determination by the Trust
Advisory Board, by any court of competent jurisdiction upon application of the
Service Provider; (ii) expenses incurred in defending or investigating a
threatened or pending action, suit or proceeding shall be paid in advance of the
final disposition of such action, suit or proceeding only if authorized by the
Trust Advisory Board after receipt of a written affirmation by the Service
Provider of its good faith belief that it has met the standard of conduct
necessary for such indemnification and an undertaking by or on behalf of the
Service Provider to repay all amounts so advanced if it shall ultimately be
determined that the Service Provider is not entitled to indemnification pursuant
to the terms of the Liquidating Trust Agreement or the laws of the State of
Delaware; and (iii) indemnification pursuant to this Agreement shall only be
provided upon and after a determination, in accordance with Section 7.2 of the
Liquidating Trust Agreement, that indemnification of the Service Provider is
proper under the circumstances and would be granted under Section 7.2 of the
Liquidating Trust Agreement because, in addition to all other requirements for
indemnification set forth in Section 7.2 of the Liquidating Trust Agreement
(which shall have been satisfied in full), the Service Provider has met the
applicable standard of conduct set forth therein.
8. Notices. Any notice or communication required to be given by either
party hereunder shall be in writing and shall be hand delivered or sent by
certified or registered mail, return receipt requested, or by confirmed
facsimile or electronic transmission or by an overnight delivery service to the
party receiving such communication at the address specified below:
IF THE LIQUIDATING TRUST:
Liquidating Trust for Highlands Insurance Group, Inc. and Subsidiaries
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇
▇▇▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax number: ▇▇▇-▇▇▇-▇▇▇▇
IF THE SERVICE PROVIDER:
[XYZ, LLC]
--------------------------
--------------------------
Attention: Managing Member
Fax number:
or such other address as either party may in the future specify to the other
party. Notices shall be deemed delivered when received by the party to whom they
were addressed.
9. General.
(a) This Agreement constitutes the entire agreement and
understanding between the parties with respect to the subject matter hereof, and
may be amended or modified only by a writing signed by both parties hereto.
(b) Neither party shall assign, sub-license, sub-contract, charge or
otherwise encumber any of its rights or obligations under this Agreement without
the prior written consent of the other party.
(c) This Agreement will be construed and enforced in accordance with
the laws of the State of Delaware, without giving effect to principles of
conflicts of law, and any litigation arising out of or connected in any way with
this Agreement shall take place in State or Federal court of competent
jurisdiction in the State of Delaware.
(d) If any provision of this Agreement (or any portion thereof) is
determined to be invalid or unenforceable the remaining provisions of this
Agreement shall not be affected thereby and shall be binding upon the
Liquidating Trust and the Service Provider and shall be enforceable as though
said invalid or unenforceable provision (or portion thereof) were not contained
in this Agreement.
(e) The failure by either the Liquidating Trust or the Services
Provider to insist upon strict performance of any of the provisions contained in
this Agreement shall in no way constitute a waiver of its rights as set forth in
this Agreement, at law or in equity, or a waiver of any other provisions or
subsequent default by the other party in the performance of or compliance with
any of the terms and conditions set forth in this Agreement.
(f) The headings of this Agreement are intended solely for
convenience of reference and shall be given no effect in the interpretation or
construction of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
THE LIQUIDATING TRUST
By:_______________________________
Name: ____________________________
Title: ___________________________
[XYZ, LLC]
By:_______________________________
Name: ____________________________
Title: ___________________________
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