Exhibit 3.2
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DECLARATION OF TRUST
OF
CATSKILL LITIGATION TRUST
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January 12, 2004
Table of Contents
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DECLARATION OF TRUST OF CATSKILL LITIGATION TRUST..................................................................1
ARTICLE I DEFINITIONS AND INTERPRETATIONS.........................................................................1
Section 1.1. Definitions..........................................................................1
Section 1.2. Interpretations......................................................................3
ARTICLE II THE TRUST ESTATE.......................................................................................3
Section 2.1. Assets of the Trust Estate...........................................................3
Section 2.2. The Fund, Recovery Account and Expense Account.......................................4
Section 2.3. Payment of Expenses and Other Withdrawals
from the Expense Account.............................................................4
Section 2.4. Deposits to and Distributions from the Recovery Account..............................4
ARTICLE III THE TRUSTEES .........................................................................................5
Section 3.1. Responsibilities and Powers of the Litigation Trustees...............................5
Section 3.2. Administrative Trustee...............................................................5
Section 3.3. Reports to the Administrative Trustee................................................6
Section 3.4. Reports to the Beneficiaries.........................................................6
Section 3.5. Death or Resignation of a Litigation Trustee.........................................6
Section 3.6. Expenses and Fees of Litigation Trustees.............................................6
Section 3.7. Fees of the Administrative Trustee...................................................7
Section 3.8. Interests of Trustees................................................................7
Section 3.9. Default and Notice...................................................................7
Section 3.10. Retention of Attorneys, Accountants and Other Professionals
and Power to Direct Litigants ...................................................... 8
ARTICLE IV ADMINISTRATION ........................................................................................9
Section 4.1. Appointment, Resignation and Removal of Administrative Trustee.......................9
Section 4.2. Responsibilities of the Administrative Trustee.......................................9
ARTICLE V UNITS .................................................................................................10
Section 5.1. Units ..............................................................................10
Section 5.2. Provisions Regarding Units Not Registered under Securities Act......................10
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Table of Contents
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(continued)
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Section 5.3. Provisions Regarding Units Registered under Securities Act..........................11
ARTICLE VI LIMITATION OF RIGHTS OF, AND SUITS BY, BENEFICIARIES..................................................12
Section 6.1. Limitations on Rights of Beneficiaries..............................................12
Section 6.2. Limitations on Suits by Beneficiaries...............................................12
ARTICLE VII LIMITATION OF LIABILITY OF BENEFICIARIES, TRUSTEES AND
OTHERS...............................................................................................14
Section 7.1. Liability...........................................................................14
Section 7.2. Exculpation.........................................................................14
Section 7.3. Fiduciary Duty......................................................................15
Section 7.4. Indemnification.....................................................................15
ARTICLE VIII DISSOLUTION AND TERMINATION.........................................................................16
Section 8.1. Termination.........................................................................16
ARTICLE IX MISCELLANEOUS ........................................................................................17
Section 9.1. Notices ............................................................................17
Section 9.2. Governing Law.......................................................................18
Section 9.3. Amendments..........................................................................19
Section 9.4. Intention of Parties................................................................19
Section 9.5. Headings 19
Section 9.6. Successors and Assigns..............................................................19
Section 9.7. Partial Enforceability..............................................................19
Section 9.8. Specific Performance................................................................19
Section 9.9. Counterparts........................................................................20
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DECLARATION OF TRUST
OF CATSKILL LITIGATION TRUST
A GRANTOR TRUST UNDER SECTION 671 ET. SEQ. OF THE INTERNAL REVENUE CODE
THIS DECLARATION OF TRUST, dated and effective as of January 12, 2004, made by
CATSKILL DEVELOPMENT, L.L.C., MOHAWK MANAGEMENT, L.L.C., MONTICELLO RACEWAY
DEVELOPMENT COMPANY, L.L.C., each a New York limited liability company, and
Empire Resorts, Inc., a Delaware Corporation, as creators (the "Settlors"), and
Joseph Bernstein, residing at 6663 Casa Grande Way, Delray Beach, Florida 33446,
Paul deBary, residing at One White Birch Lane, Cos Cob, Connecticut 06807, and
Christiana Bank & Trust Company with a principal place of business at 1314 King
Street, Wilmington, Delaware 19801 and the Beneficiaries (as defined below) to
create the "Catskill Litigation Trust."
WITNESSETH THAT:
WHEREAS, the Settlors, Catskill Development, L.L.C., Mohawk
Management, L.L.C. and Monticello Raceway Development Company, L.L.C., (the
"Litigants") are the plaintiffs in a lawsuit brought in the United States
District Court for the Southern District of New York; and
WHEREAS, Settlor, Empire Resorts, Inc. ("Empire"), has significant
ownership interests in each of the Litigants and is engaged in a consolidation
of its business interests with Catskill Development, L.L.C.; and
WHEREAS, the result of such consolidation will be that the various
owners of the Litigants will become shareholders in Empire; and
WHEREAS, the Settlors believe that their interests in the Litigations
(as defined below) may one day be of significant value and are desirous of
maintaining and ensuring the continuation of the Litigations and their proper
administration for the benefit of the Beneficiaries (as defined below); and
WHEREAS, the Settlors also believe that the nature of the Litigations
and the supervision requirements and other needs of the Litigations are
significantly different from the Settlors' operating business ventures; and
WHEREAS, for such purposes, the Settlors have determined to establish
an irrevocable trust in which the Settlors will have no interest whatsoever, on
the terms and conditions contained herein and have asked Paul deBary and Joseph
Bernstein to serve as Trustees therefor and to participate in the drafting and
preparation of this Declaration of Trust; and
NOW THEREFORE, the Settlors hereby irrevocably assign, transfer and
convey to the Trustees the Trust Estate described in Article II below, which the
Trustees agree to hold in Trust and administer on the terms and conditions
described below.
ARTICLE I
DEFINITIONS AND INTERPRETATIONS
Section 1.1 DEFINITIONS. For purposes of this Declaration of Trust,
the following words and terms shall have the meanings set forth below, unless
the context clearly requires otherwise:
"Administrative Trustee" means the Christiana Bank & Trust Company or
any successor administrative trustee of the Litigation Trust appointed or
serving in accordance with Article IV and Section 3.2 hereof.
"Affiliate" has the same meaning as given that term in Rule 405 of the
Securities Act of 1933, as amended.
"Beneficiary" means a Person having a beneficial ownership interest in
the Claims, consisting of one or more Units, or any successor thereto, as
provided in Article V hereof.
"Budget" means the written estimate of future Expenses of the
Litigation Trust approved in writing by both Litigation Trustees and provided to
the Administrative Trustee as set forth in Section 3.3 hereunder.
"Claims" means all of the rights of the Litigation Trust to receive
damages or other compensation for actions complained of in the Litigations, as
initially filed or as they may be or have been subsequently amended, refined,
modified or expanded, including compensatory or punitive damages or the proceeds
of any settlements of the causes of action based thereon.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the Securities and Exchange Commission.
"Damages" shall have the meaning set forth in Section 7.4 hereof.
"Expense Account" means the Expense Account established and to be
maintained pursuant to Article II hereof.
"Expenses" shall include any fees, costs or expenses for or in
connection with attorneys, stenography, recording, experts, research and
analysis, document retention, production and management, public relations,
investigations, budgeting, accounting, financing, insurance, administration and
general management and any similar charges incurred for the purposes of this
Litigation Trust, including interest and other charges in connection with any
borrowing by or on behalf of this Litigation Trust, costs of Litigation
Trustees' and Administrative Trustee's liability insurance and any filing or
other court charges in connection with the Litigations.
"Fund" means the fund established and to be maintained pursuant to
Article II hereof.
"Indemnified Person" means (a) the Litigation Trustees, any Affiliate
of the Litigation Trustees and any officers, directors, stockholders, members,
partners, employees, representatives, custodians, nominees or agents of the
Litigation Trustees; (b) the Settlors, any Affiliate of the Settlors and any
partners, employees, representatives or agents of the Settlors; (c) the
Administrative Trustee, any Affiliate of the Administrative Trustee and any
officers, employees, representatives or agents of the Administrative Trustee and
(d) any officer, employee or agent of the Litigation Trust or its Affiliates.
"Line of Credit" means the irrevocable, direct payment Line of Credit
from Empire to the Litigation Trust, dated as of the date hereof and in the form
of Exhibit A attached hereto.
"Litigation Trust" means the Catskill Litigation Trust created by this
Declaration of Trust.
"Litigation Trustees" mean Joseph Bernstein and Paul deBary or any
of their respective successors hereunder acting as Trustees pursuant to Article
III hereof.
"Litigations" means (1) the lawsuit entitled CATSKILL DEVELOPMENT,
L.L.C., MOHAWK MANAGEMENT, L.L.C., AND MONTICELLO RACEWAY DEVELOPMENT COMPANY,
L.L.C., PLAINTIFFS, VS. PARK PLACE ENTERTAINMENT CORPORATION, DEFENDANT. (Civil
Action No. 00 CIV 8660 in the United States District Court for the Southern
District of New York), which is presently on appeal, (2) the lawsuit entitled
CATSKILL DEVELOPMENT, L.L.C., PLAINTIFF. VS. GARY MELIUS, IVAN KAUFMAN, WALTER
HORN, PRESIDENT R.C. - ST. REGIS MANAGEMENT COMPANY, ET AL, DEFENDANTS. (Index
No. 891/03 Supreme Court of the State of New York, County of Sullivan), which
was filed in April 2003, and (3) any similar actions or proceedings arising from
the acts and circumstances related to these lawsuits, including potential claims
against the St. Regis Mohawk Tribe, if any.
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"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Purposes of the Litigation Trust" means the prosecution of the
Litigations now pending or hereafter filed through the recovery of any
settlements or final judgments thereof and the distribution of the net amount of
any such recoveries to the Beneficiaries as provided herein.
"Recovery Account" means the Recovery Account established and to be
maintained pursuant to Article II hereof.
"Statutory Trust Act" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. Code Section 3801 et seq., as it may be amended from time to time,
or any successor legislation.
"Transfer Agent" means a registrar and/or transfer agent acceptable to
the Litigation Trustees.
"Trustee" means any of the Litigation Trustees or the Administrative
Trustee.
"Unit" means a fractional interest in the Claims.
Section 1.2 INTERPRETATIONS. Unless the context of this Declaration
of Trust otherwise clearly requires, (i) references to the plural include the
singular, the singular includes the plural and the part includes the whole, (ii)
"or" has the inclusive meaning represented by the phrase "and/or", (iii) the
words "hereof," "herein," "hereunder" and similar terms refer to this
Declaration of Trust as a whole and not to any particular provision of this
Declaration of Trust, and (iv) the word "including" has the meaning "including,
but not limited to." In this Declaration of Trust, in determining of a period of
time from a specified date to a later specified date, the word "from" means
"from and including" and the words "to" and "until" each mean "to but
excluding". The article headings contained in this Declaration of Trust are for
reference purposes only and do not control or affect the construction of this
Declaration of Trust or its interpretation in any respect. Article and section
references are to this Declaration of Trust unless otherwise specified. Unless
otherwise specified, all accounting terms shall be interpreted, and all
accounting determinations hereunder are to be made in accordance with generally
accepted accounting principles, but financial statements delivered hereunder
need not be prepared in accordance with such principles unless specifically
required by the Litigation Trustees.
ARTICLE II
THE TRUST ESTATE
Section 2.1 ASSETS OF THE TRUST ESTATE. It is the intention of the
parties hereto to form a statutory trust pursuant to the Statutory Trust Act and
that this Declaration of Trust shall constitute the governing instrument of the
statutory trust. Upon the execution of this Declaration of Trust, and the filing
of a Certificate of Trust (in compliance with the requirements of the Statutory
Trust Act) with the Secretary of State of the State of Delaware, there is hereby
created the Litigation Trust to be known as the "Catskill Litigation Trust" and
the Litigants hereby irrevocably assign, transfer and convey to the Litigation
Trust, for the benefit of the Beneficiaries, (i) all of their right, title and
interest in and to the Litigations, including any and all claims of the
Litigants against Park Place Entertainment Corporation, or any co-conspirator,
including, without limitation, for any wrong done to the Litigants as of any
date prior to the date of this Declaration of Trust or otherwise in connection
with the Litigations, together with the right to personally represent the
plaintiffs therein, appear in any such proceeding in the name of the Litigants
and to conduct, pursue collection of, settle, release or otherwise dispose of,
and receive the proceeds or other benefits of the Litigations and (ii) to any
and all other property which may hereafter be conveyed, mortgaged, pledged or
assigned to the Litigation Trust by the Litigants. In addition, Empire hereby
delivers to the Litigation Trust its unconditional and irrevocable Line of
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Credit in the form attached as Exhibit A to this Declaration of Trust. On behalf
of the Litigation Trust, the Litigation Trustees hereby agree to reimburse
Empire for any drawings on the Line of Credit according to the terms and
conditions provided therein.
Section 2.2 THE FUND, RECOVERY ACCOUNT AND EXPENSE ACCOUNT. There is
hereby created a Fund to be maintained by the Administrative Trustee. The Fund
shall consist of two accounts, the Expense Account and the Recovery Account. For
the Fund, the Administrative Trustee may establish on behalf of the Litigation
Trust one or more accounts with banks or brokerage firms in which all or part of
the moneys or investments of the Litigation Trust to be deposited in the Fund
may be held, invested and reinvested by the Administrative Trustee pending
disbursement or distribution as provided in this Declaration of Trust. Any
amount on deposit in the Fund that is not required to be held for present use or
distributions shall be accumulated and retained in the Fund and shall be
invested and reinvested by the Administrative Trustee as directed in the sole
discretion of the Litigation Trustees so as to obtain a reasonable return on
investment with proper regard for the preservation of the principal and so as to
be reasonably available at the times estimated to be necessary for distributions
in accordance with the Purposes of the Litigation Trust.
Section 2.3 PAYMENT OF EXPENSES AND OTHER WITHDRAWALS FROM THE EXPENSE
ACCOUNT.
(a)Amounts drawn on the Line of Credit, amounts transferred from the
Recovery Account to the Expense Account as provided in Section 2.4(a) and any
other amounts received by the Litigation Trust, other than amounts received as a
recovery of any settlement or award of the Claims, shall be deposited in the
Expense Account. Amounts in the Expense Account shall be used to pay any
Expenses determined to be necessary or useful for the Purposes of the Litigation
Trust in the sole and absolute discretion of the Litigation Trustees.
(b) The Administrative Trustee shall make payments out of the Expense
Account upon (i) the written direction of one of the Litigation Trustees as of
the first business day of each calendar quarter to pay the quarterly fees of the
Litigation Trustees and the Administrative Trustee as set forth in Section 3.6
(a) and Section 3.7, respectively, and (ii) written direction signed by one of
the Litigation Trustees with respect to expenses set forth in the Budget
(provided that the Litigation Trustee shall specify in the written direction the
line item of the Budget that includes such expense) and by both Litigation
Trustees with respect to all other expenses. The Administrative Trustee shall
have no obligation to verify that the amounts so requisitioned are to be used
for the Purposes of the Litigation Trust. Anything to the contrary herein
notwithstanding, the Litigation Trustees may, at any time and from time to time,
direct the Administrative Trustee to pay any Expense of the Litigations or apply
to or for the benefit of Beneficiaries so much or the entire principal of the
Expense Account, as the Litigation Trustees, in their sole discretion, may deem
advisable, which payments and applications shall be absolute and free from the
Litigation Trust and the application and advisability of such payments shall be
final and conclusive upon all Persons who may be interested or may become
interested in the Litigation Trust, and upon making such payments or
applications, the Administrative Trustee and all Litigation Trustees shall be
fully released and discharged from all further liability or accountability
therefor.
Section 2.4. DEPOSITS TO AND DISTRIBUTIONS FROM THE RECOVERY ACCOUNT.
(a) The amount of proceeds received on account of any settlement or
award in connection with the Claims shall be deposited in the Recovery Account.
In the event that the Litigation Trust receives any proceeds on account of any
settlement or award in connection with the Claims, an amount necessary to pay
any current debts or other obligations of the Litigation Trust and to provide
for future Expenses of the Litigation Trust, each as shown in the statement
delivered to the Administrative Trustee by the Litigation Trustees as provided
in Article III hereof, shall be transferred to the Expense Account from the
Recovery Account or applied directly to the retirement of such debts or other
obligations at the direction of the Litigation Trustees. Not later than thirty
days after the close of each calendar year, if there have been deposits in the
Recovery Account during such year, or within thirty days of receipt by the
Administrative Trustee of a notice of termination of the Litigation Trust
pursuant to Article VIII hereof, the Administrative Trustee shall calculate the
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balance in the Recovery Account at the end of such year or as of the date of
such notice and the amount so calculated shall be withdrawn from the Recovery
Account and shall be applied and used to make distributions for the Purposes of
the Litigation Trust as follows:
FIRST: An amount necessary to pay the Litigation Trustees the fees for
their services as Litigation Trustees as set forth in Section 3.6(b).
SECOND: If any amount remains after the above requirements have been
met, $7,500,000 shall be paid to Empire to reimburse it for prior expenses
incurred in connection with the Litigation and any amounts outstanding under the
Line of Credit shall be repaid to Empire.
THIRD: If any amount remains after the above requirements have been
met, such amount remaining shall be divided among the Beneficiaries in
proportion to their ownership of Units as shown on the registration books of the
Administrative Trustee or Transfer Agent, as applicable, as of the date that
such distribution is made.
(b) All distributions of the Litigation Trust are to be made in the
sole discretion of the Litigation Trustees. In making and scheduling
distributions from the Litigation Trust, no Litigation Trustee shall have any
liability to the Beneficiaries, or to potential beneficiaries of the Litigation
Trust, or to any other Person, for any failure or alleged failure to follow such
direction nor shall any Litigation Trustee be subject to suit by any Person that
contests the validity of any action taken hereunder or seeks to compel or direct
the use, investment or application of amounts in the Litigation Trust other than
as determined in the discretion of the Litigation Trustees.
ARTICLE III
THE TRUSTEES
Section 3.1. RESPONSIBILITIES AND POWERS OF THE LITIGATION TRUSTEES.
(a) Except as specifically provided in this Declaration of Trust,
Joseph Bernstein and Paul deBary, the Litigation Trustees, and their successors
shall have exclusive and complete authority to carry out the Purposes of the
Litigation Trust. All matters to be decided by the Litigation Trustees shall be
decided by the unanimous vote of the Litigation Trustees. In the event that the
Litigation Trustees cannot unanimously agree on a matter, they shall advise
their designated successors hereunder who will then choose a third person and
the majority vote of the Litigation Trustees and the third person so chosen
voting together shall decide such matter. Meetings of the Litigation Trustees
may be held in person or by telephone conference call. The Litigation Trustees
may hold such meetings from time to time without notice and shall not be
required to keep any record of such meetings. The Litigation Trustees shall be
responsible for the compliance of the Litigation Trust with the provisions of
the Code, but shall have no duty hereunder to render any particular accounting
for the Litigation Trust to the Beneficiaries. The Litigation Trustees shall
have all the powers necessary and appropriate to prosecute the Litigations and
administer the Litigation Trust, including the power to make draws on the Line
of Credit and to enter into other arrangements to borrow or otherwise raise
funds to pay the Expenses of the Litigation Trust, the power to bind the
Litigation Trust, enter into any and all manner of contracts as the Litigation
Trustees, in their sole and absolute discretion, shall deem necessary,
appropriate or convenient for the Purposes of the Litigation Trust.
(b) The Litigation Trustees may provide the Administrative Trustee
with specific direction and advice as to the use and investment of the income
and assets of the Litigation Trust. Upon the unanimous vote of the Litigation
Trustees, the Litigation Trustees may establish specific directions or policies
for implementation by the Administrative Trustee.
Section 3.2. ADMINISTRATIVE TRUSTEE. (a) As required by the Statutory
Trust Act, one trustee (which shall be the administrative Trustee), shall be:
(i) a natural person who is a resident of the State of
Delaware; or
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(ii) if not a natural person, an entity which has its
principal place of business in the State of Delaware,
and otherwise meets the requirements of applicable law,
including Section 3807 of the Statutory Trust Act.
(b) The Administrative Trustee shall perform the duties and
obligations specifically assigned to it, as set forth in this Declaration of
Trust and shall not have any of the duties and responsibilities of any of the
Litigation Trustees described in this Declaration of Trust.
(c) Except as otherwise set forth in this Declaration of Trust, the
Administrative Trustee shall be a Trustee for the sole and limited purpose of
fulfilling the requirements of Section 3807 of the Statutory Trust Act.
(d) The Administrative Trustee shall be either a natural person who is
at least 21 years of age or a legal entity that shall act through one or more
authorized officers.
Section 3.3. REPORTS TO THE ADMINISTRATIVE TRUSTEE. Within thirty days
of the end of each calendar year, prior to a deposit of funds into the Expense
Account pursuant to Section 2.3(c), prior to any distribution pursuant to
Section 2.4 and upon the determination by the Litigation Trustees to terminate
the Litigation Trust, the Litigation Trustees shall prepare and deliver to the
Administrative Trustee a statement showing (1) the amount required to satisfy
any indebtedness or other obligation of the Litigation Trust and the amount of
accrued Expenses as of the end of such calendar year, as of the date of a
distribution or as of the date of termination, as the case may be, and (2) the
Budget for future Expenses in carrying out the Purposes of the Litigation Trust.
In determining the amount to be applied for the Purposes of the Litigation
Trust, the Litigation Trustees are authorized, in their discretion, to take into
account or disregard, to such extent as they deem advisable, the likelihood of
any future settlements or recoveries with respect to the Claims and the extent
to which such settlements will reduce the Expenses of the Litigation Trust in
connection with the Litigations.
Section 3.4. REPORTS TO THE BENEFICIARIES. The Litigation Trustees
will be required to issue annual reports to the Beneficiaries showing the assets
and liabilities of the Litigation Trust at the end of each fiscal year and the
receipts and disbursements of the Litigation Trust for the fiscal year then
ended. The annual reports also will describe changes in the Litigation Trust's
assets, significant changes in the status of the Litigation during the reporting
period and significant actions taken by the Litigation Trustees during the
period. The financial statements contained in such reports may or may not be
audited, as determined in the sole discretion of the Litigation Trustees, but
shall be prepared in accordance with generally accepted accounting principles.
The Litigation Trustees are also required to distribute to the Beneficiaries a
special report if, in the opinion of the Litigation Trustees, a material event
relating to the Litigation Trust's assets has occurred.
Section 3.5. DEATH OR RESIGNATION OF A LITIGATION TRUSTEE. By delivery
of a written notice to the Administrative Trustee, any Litigation Trustee may
resign as Litigation Trustee. In the event of the death or resignation of Joseph
Bernstein, Ralph Bernstein shall be appointed a Litigation Trustee and if Ralph
Bernstein resigns or dies, Morad Tahbaz shall be appointed a Litigation Trustee.
In the event of the death or resignation of Paul deBary, Robert Berman shall be
appointed a Litigation Trustee and if Robert Berman resigns or dies Scott
Kaniewski shall be appointed a Litigation Trustee.
Section 3.6. EXPENSES AND FEES OF LITIGATION TRUSTEES.
(a) Each Litigation Trustee shall be entitled to reimbursement of any
Expenses incurred in carrying out the Purposes of the Litigation Trust,
including telephone, mail and messenger, travel, conference, meeting, research
and other administrative and office expenses not paid for directly by the
Litigation Trust and, in addition to the fees provided for in Section 3.6(b),
each Litigation Trustee shall also receive compensation for his services equal
to $5,000, per month, in accordance with the terms of this Declaration of Trust,
to the extent there are funds available. In the event of the resignation or
death of a Litigation Trustee, the fees and expenses payable to such Litigation
Trustee pursuant to this Section 3.6(a) shall be payable for services actually
rendered up to the date of such event of resignation or death and paid in the
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ordinary course as and when the other Litigation Trustees receive payment of
their fees and expenses under this Section 3.6(a).
(b) In addition to the fees provided for in Section 3.6(a), Joseph
Bernstein and Paul deBary shall receive compensation for their services as
Litigation Trustees equal to 4% and 1%, respectively, of the total amount
deposited into the Recovery Account in accordance with the terms of this
Declaration of Trust, to the extent there are funds available. In the event of
the resignation or death of a Litigation Trustee, the fees payable to such
Litigation Trustee pursuant to this Section 3.6(b), if any, shall be pro rated
for time served as a Litigation Trustee between the resigned or deceased
Litigation Trustee and his successor Litigation Trustee(s) and the amount
payable to such resigned or deceased Litigation Trustee shall be paid to the
Litigation Trustee or his estate in the case of a deceased Litigation Trustee;
provided, however that in the case of the resignation or death of Joseph
Bernstein, the portion of the fee to be pro-rated shall be equal to 1% of the
total amount deposited into the Recovery Account and Joseph Bernstein or Joseph
Bernstein's estate, as the case may be, shall continue to be entitled to receive
an amount equal to 3% of the total amount deposited into the Recovery Account.
Section 3.7. FEES OF THE ADMINISTRATIVE TRUSTEE. So long as Christiana
Bank & Trust Company is the Administrative Trustee, the Administrative Trustee
shall receive compensation for its services as follows:
(i) Acceptance Fee..................................$5,000.00;
Includes the first month administration fee
(ii) Monthly Administration Fee........................$ 500.00; and
(iii)Custody Fee on any cash or marketable securities, other than on cash
balances held in the SEI Daily Income Fund Class B:
.05 of 1% (5.00 basis points) per annum the first $10,000,000 of the
accounts fair market value; and
.03 of 1% (3.00 basis points) per annum on the balance of the accounts fair
market value.
Plus: $15 for each DTC or FED eligible trade, if applicable, and
outgoing wire transfers: $20 per transfer
Out of pocket expenses, including legal fees, which may be incurred
during the set-up and administration of the Litigation Trust, will be billed at
cost in addition to the above. In the event that special administrative services
and attention are required due to unusual circumstances, an additional
maintenance fee will be charged to cover time and expenses. In the event
Christiana Bank & Trust Company is no longer acting as Administrative Trustee,
the compensation of the Administrative Trustee shall be as mutually agreed to by
the Litigation Trustees and the Administrative Trustee.
Section 3.8. INTERESTS OF TRUSTEES. Any Trustee may be a Beneficiary
of the Litigation Trust, but no Trustee may have any interest in, or be under
the control of any of the defendants in the Litigations. No Trustee shall have
any responsibility or duty to any Beneficiary for the value of the Litigation
Trust or for the application of any of the amounts therein to any particular
purpose of the Litigation Trust. No Trustee shall be under any obligation to or
duty to perform any act that would involve him in any expense or liability or to
institute or defend any suit in respect of this Declaration of Trust. The
Trustees shall be fully protected in acting upon the advice of counsel and on
any notice resolution, request, consent, order or other paper or document
believed by him to be genuine and, if applicable, to have been signed or
presented by the proper party.
Section 3.9. DEFAULT AND NOTICE. The Litigation Trustees shall, within
ninety days after the occurrence of (i) a breach by Empire of any of its payment
obligations under the Line of Credit, (ii) a breach by the Administrative
Trustee of its obligations hereunder, or (iii) a default by the Litigation Trust
in payment to the Beneficiaries pursuant to Section 2.4, transmit by mail, first
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class postage prepaid, to the Beneficiaries, notice of such default actually
known to the Litigation Trustees, unless such default has been cured before the
giving of such notice; provided, however, the Litigation Trustees shall be
protected in withholding such notice if and so long as the Litigation Trustees
in good faith determine that the withholding of such notice is in the best
interests of the Beneficiaries.
Section 3.10. RETENTION OF ATTORNEYS, ACCOUNTANTS AND OTHER
PROFESSIONALS AND POWER TO DIRECT LITIGANTS.
(a) The Litigation Trustees shall retain, at the expense of the
Litigation Trust, such attorneys as counsel to the Litigation Trust (including,
without limitation, counsel to Litigants or any of their successors in
connection with the Litigations) as the Litigation Trustees in their sole
discretion may select, and the Litigation Trustees may dismiss such attorneys in
their sole discretion. The Litigation Trustees shall instruct the Litigants (or
any of their successors), at the expense of the Litigation Trust, to aid in the
prosecution of the Litigations and to perform such other functions as may be
appropriate in the Litigation Trustees' sole and absolute discretion, and the
Litigation Trustees shall cause the Litigants (or any of their successors), at
the expense of the Litigation Trust, to follow and comply with such
instructions. The Litigation Trustees may commit the Litigation Trust to and
shall pay such attorneys compensation from the Expense Account or other funds of
the Litigation Trust for services rendered and expenses incurred and may enter
into arrangements on such terms as may be approved by the Litigation Trustees
with such counsel, including terms providing that all or a portion of such
counsel's compensation may be contingent and may be based on a percentage of any
recovery, provided, however, that no such arrangement shall provide for recourse
against the Litigants or their successors. The Litigation Trustees shall have
full authority to dismiss any such attorneys retained by the Litigants (or any
of their successors thereto). Unless and until instructed to the contrary by the
Litigation Trustees, the attorneys currently retained to aid in the prosecution
of the Litigations shall continue in such roles for the Litigation Trust and all
parties hereto, having been fully advised, waive any conflict of interest, if
any, which the attorneys currently retained may have with respect to any party
to this Declaration of Trust. In addition, any attorneys, experts, advisors,
consultants and investigators retained by or at the direction of the Litigation
Trustees and any experts, advisors, consultants and investigators retained by
attorneys to aid in the prosecution of the Litigations shall be authorized by
this Declaration of Trust to accept directions from the Litigation Trustees with
respect to the Litigations, notwithstanding any conflict of interest that may
arise by reason of such directions with the interests of any party to this
Declaration of Trust. The Litigation Trustees shall have no duty to the Settlors
(or any Affiliates, successor entities, or Affiliates of any successor entities)
to consider any interest the Settlors or any such entity may have with respect
to the Litigations. All oral and written communications between any attorneys
retained by or at the direction of the Litigation Trustees on the one hand, and
the Settlors, the Litigation Trust, any Litigation Trustee, their Affiliates, or
any successor entities or any Affiliates of any successor entities, on the other
hand, relating to the Litigations and/or to the actions of the Litigation
Trustees, will be protected by the attorney-client privilege and/or the attorney
work product doctrine, and no such communication will result in the waiver of
any applicable claim of confidentiality or privilege.
(b) The Litigation Trustees may but are not required to retain an
independent public accounting firm to audit the financial books and records of
the Litigation Trust and to perform such other reviews and/or audits as may be
appropriate in the Litigation Trustees' sole and absolute discretion. The
Litigation Trustees may commit the Litigation Trust, and shall cause the
Litigation Trust, to pay such accounting firm compensation from the Expense
Account or other funds of the Litigation Trust for services rendered and
expenses incurred. The Litigation Trustees shall have full authority to dismiss
such accounting firm.
(c) The Litigation Trustees may retain on behalf of the Litigation
Trust such other experts, advisors, consultants, investigators or other support
staff, assistants or employees as the Litigation Trustees, in their sole and
absolute discretion, may deem necessary or appropriate to assist the Litigation
Trustees to carry out their powers and duties under this Declaration of Trust.
The Litigation Trustees may commit the Litigation Trust to and shall cause the
Litigation Trust to pay all such Persons compensation from the Expense Account
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or other funds of the Litigation Trust for services rendered and expenses
incurred. The Litigation Trustees shall have full authority to dismiss such
Persons.
ARTILCE IV
ADMINISTRATION
Section 4.1. APPOINTMENT, RESIGNATION AND REMOVAL OF ADMINISTRATIVE
TRUSTEE. The Administrative Trustee shall be appointed, and be subject to
removal, by the Litigation Trustees. By delivery of a written notice to the
Litigation Trustees, the Administrative Trustee may resign as Administrative
Trustee. The Litigation Trustees may remove an Administrative Trustee with or
without cause. In the event of the death, resignation or removal of the
Administrative Trustee, the Litigation Trustees may appoint a successor
Administrative Trustee or any one of them may assume the responsibilities of the
Administrative Trustee as set forth in this Declaration of Trust, except that
upon such death, resignation or removal, the Litigation Trustees shall
contemporaneously appoint a Trustee meeting the requirements set forth in
Section 3.2 hereof.
Section 4.2. RESPONSIBILITIES OF THE ADMINISTRATIVE TRUSTEE.
(a) At least twice a year, the Administrative Trustee shall provide
written statements to the Litigation Trustees reflecting the balance and return
of the investments of the Litigation Trust and any withdrawals of funds from the
Litigation Trust in the prior period.
(b) The Administrative Trustee shall not have any responsibility or
duty to any Beneficiary for the value of the Litigation Trust or the application
of any of the amounts in the Expense Account, except to apply such amounts as
directed by the Litigation Trustees. The Administrative Trustee shall not be
under any obligation to or duty to perform any act that would involve it in any
expense or liability or to institute or defend any suit in respect of this
Declaration of Trust. The Administrative Trustee shall be fully protected in
acting upon the advice of counsel and on any notice resolution, request,
consent, order or other paper or document believed by it to be genuine and, if
applicable, to have been signed or presented by the proper party.
(c) The Administrative Trustee is not authorized to cause the
Litigation Trust to engage in any activities, trade or business other than as
enumerated in the following sections:
(i) Section 2.2 (maintenance of Fund consisting of Expense
Account and Recovery Account);
(ii) Section 2.3(b) (making payments out of Expense Account);
(iii) Section 2.4(a) and (b) (calculating balance in Recovery
Account and distributing as directed by Litigation Trustees);
(iv) Section 4.2(a) (providing statements with respect to the
Litigation Trust);
(v) Section 5.2 (keeping books for registration of ownership of
Units); and
(vi) Section 9.3 (amendments).
The Administrative Trustee shall not have any discretionary power
whatsoever with respect to the performance of its duties as provided above and
shall act only in accordance with the express written direction from one of the
Litigation Trustees, except with respect to making of payments for expenses not
provided for in the Budget under Section 2.3(b) in which case the express
written direction of both Litigation Trustees shall be required. The
Administrative Trustee shall not be responsible for the preparation or filing of
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any tax returns for the Litigation Trust or for any federal, state or local tax
reporting with respect to the Litigation Trust.
ARTICLE V
UNITS
Section 5.1. UNITS. Each Unit represents a fractional ownership
interest in theClaims, and all Units shall be on a pari-passu basis, without
preference or priority of any kind, and shall be equally entitled to the
benefits of this Declaration of Trust. The Beneficiaries, the respective number
of Units owned by each Beneficiary and their respective pro-rata share of the
Claims is based on each Beneficiary's percentage ownership interest in the
Litigations and is set forth on Schedule I hereto.
Section 5.2. PROVISIONS REGARDING UNITS NOT REGISTERED UNDER
SECURITIES ACT. Until such time as the resale of the Units has been registered
under the Securities Act of 1933, as amended, and any applicable state
securities laws:
(a) The Administrative Trustee shall keep books for the registration
of the ownership of the Units as provided herein. The Units cannot be resold,
pledged, assigned, or otherwise disposed of unless they are subsequently
registered under the Securities Act of 1933, as amended and under applicable
state securities laws of certain states, in which case the provisions of Section
5.3 will apply . Except by operation of law or by will or the laws of descent
and distribution, Beneficiaries may not pledge, hypothecate, assign, encumber
sell, transfer or alienate in any manner any Units, nor shall such Units be in
any manner subject to the debts, contracts, liabilities, engagements, torts or
obligations of any Beneficiary or any claims against any Beneficiary. The
transfer of Units by operation of law or by will or by the laws of descent and
distribution may only be recorded on the books of registration kept by the
Administrative Trustee upon request by the Beneficiary in person or by his duly
authorized attorney or legal representative, and upon the delivery of
documentation reasonably acceptable to the Litigation Trustees evidencing to the
satisfaction of the Litigation Trustees the number of Units to be transferred
and the circumstances authorizing such transfer. Upon delivery of a written
direction from one of the Litigation Trustees at the principal office of the
Administrative Trustee, the Administrative Trustee shall cause such transfer to
be evidenced in the registration books of the Litigation Trust. Any transfer in
violation of this Section 5.2(a) shall be void ab initio.
(b) The Person in whose name any Units are registered on the
registration books of the Administrative Trustee shall be deemed and regarded as
the sole and absolute owner of such Units for all purposes, and payment of or on
account of such Units shall be made only to or upon the order of the registered
owner thereof or his duly authorized attorney. All such payments shall be valid
and effectual to satisfy and discharge any liability for payments under this
Declaration of Trust with respect to such Units to the extent of the sum or sums
so paid. The Administrative Trustee may charge a fee to cover the reasonable
cost of any such transfer and shall deposit such fee in the Expense Account, and
any taxes or other governmental charges required to be paid with respect to the
same shall be paid by the Beneficiary requesting such registration of transfer
as a condition precedent to such transfer.
(c) Any notice to be given or payment to be made to any Beneficiary
hereunder shall be duly and validly given if mailed by the Administrative
Trustee by first class mail, postage prepaid, to the name and address shown for
such Beneficiary on the registration books of the Administrative Trustee. Any
Beneficiary may deliver a written notice of change of address to the
Administrative Trustee, and the Administrative Trustee shall be entitled to rely
thereon, but no such change of address shall be effective if the Administrative
Trustee requests and does not receive satisfactory assurances of the bona fides
of such change of address.
(d) The inclusion of the foregoing provisions shall constitute the
appointment of the Administrative Trustee as agent for the Litigation Trustees
to do any and all things necessary to effect the registration of any transfer.
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Section 5.3. PROVISIONS REGARDING UNITS REGISTERED UNDER SECURITIES
ACT. Upon the registration for resale of the Units under the Securities Act of
1933, as amended, and any applicable state securities laws:
(a) The Litigation Trust shall issue Certificates representing the
Units in the Litigation Trust.
(b) The Trust shall retain a Transfer Agent for purposes of keeping
books for the registration of the ownership of the Units as provided herein. The
Litigation Trust will place a legend denoting the restrictions on the
Certificates representing the Units. Units may only be registered and
transferred on the books of registration kept by the Transfer Agent upon request
by the Beneficiary in person or by his duly authorized attorney or legal
representative, and upon the surrender of the Certificate or Certificates
evidencing the ownership of such Units, together with a written instrument of
transfer executed by the Unitholder or his duly authorized attorney or legal
representative and stating the number of Units evidenced by such Certificate to
be transferred. Upon surrender for transfer of any Certificate at the principal
office of the Transfer Agent, the Trustees shall execute and deliver in the name
of the transferee or the respective transferees a new Certificate or
Certificates evidencing the number of Units owned thereby according to the
records of the Transfer Agent. In the event that the Unitholder directs that
less than all of the Units represented by any Certificate are to be transferred,
the Trustees shall also execute and deliver to the original Unitholder a new
Certificate representing the balance of the Units that have not been
transferred. All Units issued upon any registration of transfer or exchange of
Units shall be legal, valid and entitled to the same benefits under this
Declaration of Trust as the Units surrendered upon such registration of transfer
or exchange. Any transfer in violation of this Section 5.3(b) shall be void ab
initio.
(c) The Person in whose name any Units are registered on the
registration books of the Transfer Agent shall be deemed and regarded as the
sole and absolute owner of such Units for all purposes, and payment of or on
account of such Units shall be made only to or upon the order of the registered
owner thereof or his duly authorized attorney. All such payments shall be valid
and effectual to satisfy and discharge any liability for payments under this
Declaration of Trust with respect to such Units to the extent of the sum or sums
so paid. The Transfer Agent may charge a fee to cover the reasonable cost of any
such transfer and shall deposit such fee in the Expense Account, and any taxes
or other governmental charges required to be paid with respect to the same shall
be paid by the holder of the Certificate requesting such registration of
transfer or exchange as a condition precedent to such transfer or exchange.
(d) If: (a) any mutilated Certificates should be surrendered to the
Transfer Agent, or if the Transfer Agent shall receive evidence to its
satisfaction of the destruction, loss or theft of any Certificate; and (b) there
shall be delivered to the Transfer Agent such security or indemnity as may be
required by it to keep it harmless; then, in the absence of notice that such
Certificate shall have been acquired by a protected purchaser, the Transfer
Agent on behalf of the Litigation Trust shall execute and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a
new Certificate of like denomination. In connection with the issuance of any new
Certificate under this Section 5.3, the Transfer Agent may require the payment
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith. Any duplicate Certificate issued pursuant to
this Section shall constitute conclusive evidence of an ownership interest in
the relevant Certificates, as if originally issued, whether or not the lost,
stolen or destroyed Certificate shall be found at any time.
(e) Any notice to be given or payment to be made to any Beneficiary
hereunder shall be duly and validly given if mailed by the Transfer Agent by
first class mail, postage prepaid, to the name and address shown for such
Beneficiary on the registration books of the Transfer Agent. Any Beneficiary may
deliver a written notice of change of address to the Transfer Agent, and the
Transfer Agent shall be entitled to rely thereon, but no such change of address
shall be effective if the Transfer Agent requests and does not receive
satisfactory assurances of the bona fides of such change of address.
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(f) The inclusion of the foregoing provisions shall constitute the
appointment of the Transfer Agent as agent for the Litigation Trustees to do any
and all things necessary to effect the registration of any transfer.
(g) All Certificates which have been surrendered to the Transfer Agent
for transfer or acquired by the Transfer Agent for cancellation shall be
promptly canceled by the Transfer Agent. All cancelled Certificates shall not be
reissued and shall be destroyed by the Transfer Agent.
ARTICLE VI
LIMITATION OF RIGHTS OF, AND SUITS BY, BENEFICIARIES
Section 6.1. LIMITATIONS ON RIGHTS OF BENEFICIARIES. The Beneficiaries
acknowledge that:
(a) the Beneficiaries, in their capacities as Beneficiaries, are not
owners of the Litigation Trust or stockholders of the Litigants (or any of their
successors) and will have no rights to dividends, interests, liquidation
preferences or other distributions other than the payments described in Section
2.4 and will also have no voting rights. The Line of Credit is solely a
contractual obligation between Empire and the Litigation Trust, and the
Beneficiaries have no rights under the Line of Credit with respect to Empire by
reason of their ownership of Units and Empire has no liability under the Line of
Credit to the Beneficiaries;
(b) the Units are not savings accounts or deposits and are not insured
by the Federal Deposit Insurance Corporation;
(c) nothing in this Declaration of Trust shall be construed to create
any partnership or joint venture between or among the Litigants (or any of their
successors), Empire and the Beneficiaries;
(d) (i) the Litigations are solely an asset of the Litigation Trust,
(ii) the Litigations shall be conducted by and on behalf of the Litigation Trust
solely in accordance with the instructions of the Litigation Trustees pursuant
to this Declaration of Trust, and (iii) the Litigation Trustees shall have the
sole and exclusive right to direct and to take (or not take) actions relating to
the Litigations as contemplated by this Declaration of Trust (including, without
limitation, any decision with respect to the incurrence of expenses) and may,
among other things, dismiss, settle or cease prosecuting any of the Litigations
at any time without obtaining any cash or other recovery, or upon obtaining any
such cash or other recovery as the Litigation Trustees may determine; and
(e) the liability of the Litigation Trustees, the Administrative
Trustee and Settlors is limited to the extent set forth in Article VII hereof.
Section 6.2. LIMITATIONS ON SUITS BY BENEFICIARIES.
(a) To the fullest extent permitted by law, no Beneficiary shall have
any right by virtue or by availing itself of any provision of this Declaration
of Trust to institute any action or proceeding other than a suit by such
Beneficiary for nonpayment of amounts due and owing with respect to such
Beneficiaries pursuant to Section 2.4, at law or in equity or in bankruptcy or
otherwise upon or under or with respect to this Declaration of Trust, or for the
appointment of a trustee, receiver, liquidator, custodian or other similar
official or for any other remedy hereunder, unless such Beneficiary previously
shall have given to the Litigation Trustees written notice of default and of the
continuance thereof as herein before provided, and unless also the Beneficiaries
of not less than fifty percent of the Units outstanding shall have made written
request upon the Litigation Trustees to institute such action or proceeding in
their own names as trustees hereunder and shall have offered to the Trustees
such reasonable indemnity as they may require against the costs, expenses and
liabilities to be incurred therein or thereby and the Trustees for sixty days
after their receipt of such notice, request and offer of indemnity shall have
12
failed to institute any such action or proceeding; it being understood and
intended, and being expressly covenanted by the Beneficiary of every Unit with
every other Beneficiary and the Trustees, that no one or more Beneficiaries
shall have any right in any manner whatever by virtue or by availing itself or
themselves of any provision of this Declaration of Trust to effect, disturb or
prejudice the rights of any other Beneficiary, or to obtain or seek to obtain
priority over or preference to any other Beneficiary or to enforce any right
under this Declaration of Trust, except in the manner herein provided and for
the equal, ratable and common benefit of all Beneficiaries. For the protection
and enforcement of the provisions of this Section, each and every Beneficiary
and the Litigation Trustees shall be entitled to such relief as can be given
either at law or in equity.
(b) Any proceeding by Beneficiaries shall be instituted only in
accordance with the following procedures:
(i) The prospective plaintiff(s) shall deliver to the Litigation
Trustees a printed or typewritten statement not more than ten pages in
length containing (i) the name(s) and address(es) of the prospective
plaintiff(s), (ii) a statement of the nature and amount of each
plaintiff's interest in the Units, and (iii) a description of the
nature and grounds of the claims to be asserted and the relief or
remedy sought.
(ii) The Litigation Trustees shall promptly notify the
prospective plaintiff(s) of the number of copies needed for
distribution to Beneficiaries and the postage, printing and
administrative costs for preparing and mailing the statement of the
prospective plaintiff(s), a response by the Litigation Trustee, which
shall not exceed ten pages in length, a consent form described below
and a return envelope. Upon receipt of a certified check for such
postage, printing and administrative costs, the Litigation Trustees
shall promptly mail these materials to the Beneficiaries. Sixty days
after mailing, the responses received shall be open to inspection by
the prospective plaintiff(s) or any Beneficiary at reasonable times
during business hours at the office of the Litigation Trust designated
for such purposes.
(iii) The mailing to Beneficiaries shall include a consent form
reading substantially as follows:
"In response to the Catskill Litigation Trust mailing dated _________,
200_,
______________ I HEREBY CONSENT TO SUCH SUIT.
______________ I DO NOT CONSENT TO SUCH SUIT.
--------------------------------------
Signature
--------------------------------------
Printed or Typed Name of Beneficiary
--------------------------------------
Date:
If this response is not returned by ____________________________, you
will be considered as not consenting to such suit."
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ARTICLE VII
LIMITATION OF LIABILITY OF
BENEFICIARIES, TRUSTEES AND OTHERS
Section 7.1. LIABILITY.
Except as expressly set forth in this Declaration of Trust, the
Trustees shall not be:
(i) personally liable for the payment of any amounts, including,
without limitation, amounts payable pursuant to Section 2.4, to the
Beneficiaries, which payment shall be made solely from the
Litigations, if there are any proceeds distributed to the Litigation
Trust therefrom and other assets of the Litigation Trust, if any; or
(ii) required to pay to the Litigation Trust or to any
Beneficiary any deficit upon dissolution of the Litigation Trust or
otherwise.
(b) Pursuant to Section 3803(a) of the Statutory Trust Act, the
Beneficiaries shall be entitled to the same limitation of personal liability
extended to stockholders of private corporations for profit organized under the
General Corporation Law of the State of Delaware.
Section 7.2. EXCULPATION.
(a) Except as expressly set forth in this Declaration of Trust to the
fullest extent permitted by law, no Indemnified Person shall be liable,
responsible or accountable in damages or otherwise to the Litigation Trust for
any loss, damage or claim incurred by reason of any act or omission performed or
omitted by such Indemnified Person, except that (i) the Litigation Trustees
shall be liable for any such loss, damage or claim incurred by reason of any act
or omission performed or omitted by them if it shall be established in a final
judicial determination by clear and convincing evidence that any such act or
omission of the Litigation Trustees was undertaken with deliberate intent to
injure the Beneficiaries or with reckless disregard for the best interests of
such Beneficiaries and, in any event, any liability will be limited to actual,
proximate, quantifiable damages, (ii) the Administrative Trustee shall be liable
for any such loss, damage, or claim if it shall be established in a final
judicial determination by clear and convincing evidence that any such loss,
damage or claim was incurred by reason of its gross negligence or willful
misconduct with respect to such acts or omissions, and (iii) Empire shall be
liable for any such loss, damage or claim incurred by reason of any act or
omission if it is established in a final judicial determination by clear and
convincing evidence in an action brought by the Litigation Trustees or by the
Beneficiaries in compliance with Section 6.2 hereof that such damages arose as a
result of Empire or its successor's material breach of its obligations under the
Line of Credit, provided, that nothing in this Section 7.2(a) is intended to
limit the Litigation Trustees' and the Administrative Trustee's right to
insurance obtained by the Litigation Trust and the proceeds of such insurance.
(b) Except as expressly set forth in this Declaration of Trust to the
fullest extent permitted by law, none of the Beneficiaries (in their capacity as
Beneficiaries), the Trustees or the Litigation Trust shall have the right to
enforce, institute or maintain a suit, action or proceeding against an
Indemnified Person relating to the formation of the Litigation Trust, the
entering into of the Line of Credit, the Litigations or actions of the
Litigation Trustees in their capacity (or purportedly in their capacity) as
Trustees. Notwithstanding the preceding sentence of this Section 7.2(b), the
Litigation Trust (or the Litigation Trustees on behalf of the Litigation Trust)
may enforce, institute or maintain a suit, action or proceeding against (i)
Empire or its successors, for its breach of any of its obligations under the
Line of Credit; provided, that fees and expenses incurred by Empire in such a
suit, action or proceeding shall not be set off against any settlement or award
in connection with the Claims if the Litigation Trust or the Litigation Trustees
prevail in such a suit, and, if in connection with suits brought pursuant this
sentence shall be deemed expenses of the Litigation Trust payable by the
Litigation Trust out of the Recovery Account, if the Litigation Trustees do not
prevail and (ii) against the Administrative Trustee as provided in Section
2.4(b).
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(c) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Litigation Trust and upon such information,
opinions, reports or statements presented to the Litigation Trust or the
Indemnified Person by any Person as to matters the Indemnified Person reasonably
believes are within such other Person's professional or expert competence and,
if selected by such Indemnified Person, has been selected by such Indemnified
Person with reasonable care, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which payment to Beneficiaries might properly be paid.
Section 7.3. FIDUCIARY DUTY.
(a) To the extent that, at law or in equity, an Indemnified Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Litigation Trust or to any other Indemnified Person, an Indemnified Person
acting under this Declaration of Trust shall not be liable to the Litigation
Trust or to any other Indemnified Person for its good faith reliance on the
provisions of this Declaration of Trust. The provisions of this Declaration of
Trust, to the extent that they restrict the duties and liabilities of an
Indemnified Person otherwise existing at law or in equity, including common law
fiduciary duties, are agreed by the parties hereto to replace such other duties
and liabilities of the Indemnified Person.
(b) Whenever in this Declaration of Trust an Indemnified Person is
permitted or required to make a decision:
(i) in its "discretion" or under a grant of similar authority,
the Indemnified Person shall be entitled to consider such interests
and factors as it desires, including its own interests, and shall have
no duty or obligation to give any consideration to any interest of or
factors affecting the Litigation Trust or any other Person; or
(ii) in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard and shall not
be subject to any other or different standard imposed by this
Declaration of Trust or by applicable law.
Section 7.4. INDEMNIFICATION.
(a) The Litigation Trust shall indemnify, to the fullest extent
permitted by law, any Indemnified Person in connection with any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative by any Person, arising out of or relating to the
Litigation Trust, the Line of Credit, the Litigations or any acts or omissions
of the Litigation Trustees or the Administrative Trustee in their capacity or
purportedly in their capacity as Litigation Trustees or Administrative Trustee,
as the case may be, or actions taken by the Litigation Trustees or the
Administrative Trustee (including actions taken by the Litigation Trustees or
Administrative Trustee, as the case may be in their capacity as officers or
directors of the Settlors so long as such actions relate to the Litigation Trust
including, without limitation, the negotiation of the terms of the Litigation
Trust and the approval of the establishment of the Litigation Trust and related
transactions, but otherwise excluding actions taken by the Litigation Trustees
or Administrative Trustee, as the case may be in such capacities), against any
and all losses, liabilities, damages, judgments, demands, suits, claims,
assessments, charges, fines, penalties and other costs and expenses, including
attorneys' fees and expenses and other fees and expenses associated with the
defense of a claim or incurred by such Indemnified Person in obtaining
indemnification under this Declaration of Trust, whether or not in a formal
proceeding (collectively, "Damages").
(b) Notwithstanding the preceding Section (a), no indemnification
shall apply in the case of the indemnification of (i) the Litigation Trustees,
if the Beneficiaries establish in a final judicial determination by clear and
convincing evidence that such Damages arose as the result of acts or omissions
of the Litigation Trustees with deliberate intent to injure the Beneficiaries or
with reckless disregard for the best interests of such Beneficiaries, (ii) the
Administrative Trustee, if it is established in a final judicial determination
by clear and convincing evidence that such Damages arose as a result of its
gross negligence or willful misconduct or (iii) Empire or its successors, if it
is established in a final judicial determination by clear and convincing
15
evidence in an action brought by the Litigation Trustees or by the Beneficiaries
in compliance with Section 6.2 hereof that such Damages arose as the result of
Empire or its successor's material breach of any of its obligations under the
Line of Credit. The termination of any action, suit or proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere or its
equivalent, as applicable, shall not, of itself, create a presumption that (i)
the Litigation Trustees acted or decided with deliberate intent to injure the
Beneficiaries or with reckless disregard for the best interests of such
Beneficiaries, (ii) the Administrative Trustee acted with gross negligence or
willful misconduct, or (iii) the Litigation Trustees or the Beneficiaries
established by clear and convincing evidence that Empire or its successor
materially breached any of its obligations under the Line of Credit.
(c) To the fullest extent permitted by law, expenses (including
attorneys' fees and expenses) incurred by an Indemnified Person in defending a
civil, criminal, administrative or investigative action, suit or proceeding
referred to in Section 7.4(a) shall be paid by the Litigation Trust in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking (without bond or security) by or on behalf of such Indemnified
Person to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Litigation Trust as authorized in this Section
7.4.
(d) All rights to indemnification under this Section 7.4 shall be
deemed to be provided by a contract between the Litigation Trust and each
Indemnified Person who serves in such capacity at any time while this Section
7.4 is in effect. Any repeal or modification of this Section 7.4 shall not
affect any rights or obligations then existing.
(e) The Litigation Trust may purchase and maintain insurance to cover
its indemnification obligations and any other liabilities of the Litigation
Trustees and the Administrative Trustee. The Litigation Trust will use amounts
from the Expense Account (or amounts from other sources of the Litigation Trust)
to pay for such insurance.
(f) For purposes of this Section 7.4, references to "the Litigation
Trust" shall include, in addition to the resulting or surviving entity, any
constituent entity (including any constituent of a constituent) absorbed in a
consolidation or merger involving the Litigation Trust, so that any Person who
is or was a director, trustee, officer or employee of such constituent entity,
or is or was serving at the request of such constituent entity as a director,
trustee, officer, employee or agent of another entity, shall stand in the same
position under the provisions of this Section 7.4 with respect to the resulting
or surviving entity as he would have with respect to such constituent entity if
its separate existence had continued.
(g) The indemnification and advancement of expenses provided by, or
granted pursuant to, this Section 7.4 shall continue as to a Person who has
ceased to be an Indemnified Person and shall inure to the benefit of the heirs,
executors and administrators of such a Person.
ARTICLE VIII
DISSOLUTION AND TERMINATION
Section 8.1. TERMINATION.
(a) If at any time the Litigation Trustees determine, in their sole
and absolute discretion, that the assets of the Litigation Trust are not
sufficient to justify its continuance, or that tax, political or economic
changes or other considerations make continuance of the Litigation Trust
uneconomic, the Litigation Trustees are authorized to terminate the Litigation
Trust. Upon a determination to terminate the Litigation Trust, the Litigation
Trustees shall deliver a written notice of such termination to the
Administrative Trustee. Any such determination shall be conclusive and binding
on all persons and in making such determination the Litigation Trustees shall be
fully discharged from all further liability or accountability for the Litigation
Trust.
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(b) The Litigation Trust shall terminate on the date that the Claims
shall have been fully prosecuted to final judgment or dismissal, including all
appeals, and all the Litigation Trust assets shall have been distributed to the
Beneficiaries, or as the Litigation Trust shall be terminated as provided in
this Declaration of Trust.
(c) As soon as is practicable after the occurrence of the events
referred to in Sections 8.1(a) and 8.1(b), and after completion of winding up of
the Litigation Trust and satisfaction of liabilities of the Litigation Trust in
accordance with the Statutory Trust Act, the Litigation Trustees shall terminate
the Litigation Trust by filing a certificate of cancellation with the Secretary
of State of the State of Delaware.
ARTICLE IX
MISCELLANEOUS
Section 9.1. NOTICES. All notices provided for in this Declaration of
Trust shall be in writing, duly signed by the party giving such notice, and
shall be delivered, telecopied or mailed by first class mail, as follows:
(a) if given to the Litigation Trust, in care of the Administrative
Trustee at the Litigation Trust's mailing address set forth below (or such other
address as the Litigation Trust may give notice of to the Beneficiaries):
Christiana Bank & Trust Company
1314 King Street
Wilmington, DE 19801
Attention: James M. Young
Facsimile: (302) 421-9015
with a copy to:
Olshan Grundman Frome Rosenzweig & Wolosky LLP
505 Park Avenue
New York, New York 10022
Attention: Robert H. Friedman, Esq.
Facsimile: (212) 451-2222
(b) if given to the Litigation Trustees, at the mailing address set
forth below (or such other address as Litigation Trustees may give notice of to
the Beneficiaries):
(i) Joseph Bernstein
6663 Casa Grande Way
Delray Beach, Florida
33446 Facsimile: 561-499-0764
(ii) Paul deBary
c/o Marquette deBary
477 Madison Avenue
New York, New York 10022
Facsimile: 212-371-6054
(c) if given to the Settlors at the mailing address set forth below
(or such other address as the Litigation Trust may give notice of to the
Beneficiaries):
(i) Catskill Development, L.L.C.
c/o Monticello Raceway
Route 17B
Monticello, New York 12701
17
Attention: President
Facsimile: 845-791-1547
(ii) Empire Resorts, Inc.
c/o Monticello Raceway
Route 17B
Monticello, New York 12701
Attention: President
Facsimile: 845-791-1547
(iii) Mohawk Management, L.L.C.
c/o Monticello Raceway
Route 17B
Monticello, New York 12701
Attention: President
Facsimile: 845-791-1547
(iv) Monticello Raceway Development Company, L.L.C.
c/o Monticello Raceway
Route 17B
Monticello, New York 12701
Attention: President
Facsimile: 845-791-1547
(d) if given to the Administrative Trustee, at the mailing address set
forth below (or such other address as the Litigation Trust may give notice of to
the Beneficiaries):
Christiana Bank & Trust Company
1314 King Street
Wilmington, DE 19801
Attention: James M. Young
Facsimile: (302) 421-9015
with a copy to:
Duane Morris LLP
1100 N. Market Street, Suite 1200
Wilmington, DE 19801-1240
Attention: Andrew G. Kerber, Esquire
Facsimile: (302) 657-4901
(e) if given to any Beneficiary, at the address set forth on the books
and records of the Litigation Trust.
(f) All such notices shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver the same.
Section 9.2. GOVERNING LAW. This Declaration of Trust and the rights
of the parties hereunder shall be governed by and interpreted in accordance with
the laws of the State of Delaware and all rights and remedies shall be governed
by such laws without regard to the principles of conflict of laws of the State
of Delaware or any other jurisdiction that would call for the application of the
law of any jurisdiction other than the State of Delaware; provided, however,
that, to the fullest extent permitted by law, there shall not be applicable to
the Litigation Trust, the Trustees or this Declaration of Trust any provision of
the laws (statutory or common) of the State of Delaware pertaining to trusts
that relate to or regulate, in a manner inconsistent with the terms hereof (a)
the filing with any court or governmental body or agency of trustee accounts or
schedules of trustee fees and charges, (b) affirmative requirements to post
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bonds for trustees, officers, agents or employees of a trust, (c) the necessity
for obtaining court or other governmental approval concerning the acquisition,
holding or disposition of real or personal property, (d) fees or other sums
payable to trustees, officers, agents or employees of a trust, (e) the
allocation of receipts and expenditures to income or principal, (f) restrictions
or limitations on the permissible nature, amount or concentration of trust
investments or requirements relating to the titling, storage or other manner of
holding or investing trust assets or (g) the establishment of fiduciary or other
standards of responsibility or limitations on the acts or powers of trustees
that are inconsistent with the limitations or liabilities or authorities and
powers of the Trustees as set forth or referenced in this Declaration of Trust.
Section 3540 and Section 3561 of Title 12 of the Delaware Code shall not apply
to the Litigation Trust.
Section 9.3. AMENDMENTS. This Declaration of Trust may be amended,
modified or supplemented by the Litigation Trustees in accordance with this
Section 9.3. In the event the Litigation Trustees desire to amend, modify or
supplement this Declaration of Trust, the Litigation Trustees shall give written
notice to the Beneficiaries (the "Amendment Notice") briefly describing any
amendment, modification or supplement and the procedures for objecting to such
amendment, modification or supplement. If Beneficiaries holding less than
twenty-five (25%) percent of the aggregate number of the then outstanding Units
object to such amendment, modification or supplement on or before the 45th day
after the date of the Amendment Notice, then such amendment, modification or
supplement shall become effective on such 45th day. If Beneficiaries holding
twenty-five (25%) percent or more of the aggregate number of the then
outstanding Units object to such amendment, modification or supplement on or
before the 45th day after the date of the Amendment Notice, then such amendment,
modification or supplement shall become effective only upon the written consent
of Beneficiaries holding at least 66 2/3% of the aggregate number of the then
outstanding Units. Notwithstanding the foregoing, (i) the Litigation Trustees
may amend, modify or supplement this Declaration of Trust without the consent of
any Beneficiaries to cure any ambiguity, defect or inconsistency and (ii) no
amendment, modification or supplement may be made that adversely affects the
legal rights of the Administrative Trustee without the consent of the
Administrative Trustee. The Administrative Trustee shall sign any amendment,
modification or supplement authorized pursuant to this Section 9.3
Section 9.4. INTENTION OF PARTIES. It is the intention of the parties
hereto that the Litigation Trust be classified for United States federal income
tax purposes as a grantor trust that is formed to hold the Claims and liquidate
the Litigation Trust, as provided for herein. The provisions of this Declaration
of Trust shall be interpreted to further this intention of the parties.
Section 9.5. HEADINGS. Headings contained in this Declaration of
Trust are inserted for convenience of reference only and do not affect the
interpretation of this Declaration of Trust or any provision hereof.
Section 9.6. SUCCESSORS AND ASSIGNS. Whenever in this Declaration of
Trust any of the parties hereto is named or referred to, the successors and
assigns of such party shall be deemed to be included, and all covenants and
agreements in this Declaration of Trust by the Settlors and the Trustees shall
bind and inure to the benefit of their respective successors and assigns,
whether or not so expressed.
Section 9.7. PARTIAL ENFORCEABILITY. If any provision of this
Declaration of Trust, or the application of such provision to any Person or
circumstance, shall be held invalid, the remainder of this Declaration of Trust,
or the application of such provision to persons or circumstances other than
those to which it is held invalid, shall not be affected thereby.
Section 9.8. SPECIFIC PERFORMANCE. The Trustees and the Settlors
hereby agree that the obligations imposed on them in this Declaration of Trust
are special, unique and of an extraordinary character, and that, in the event of
breach by the Trustees or the Settlors, as the case may be, damages would not be
an adequate remedy and the Trustees or the Settlors, as the case may be, shall
be entitled to specific performance and injunctive and other equitable relief,
including declaratory relief, in addition to any other remedy to which they may
be entitled, at law or in equity; and the Trustees and the Settlors hereby
19
further agree to waive any requirement for the securing or posting of any bond
in connection with the obtaining of any such injunctive or other equitable
relief.
Section 9.9. COUNTERPARTS. This Declaration of Trust may contain more
than one counterpart of the signature page and this Declaration of Trust may be
executed by the affixing of the signature of each of the Trustees and the
Settlors to any of such counterpart signature pages. All of such counterpart
signature pages shall be read as though one, and they shall have the same force
and effect as though all of the signers had signed a single signature page.
20
[SIGNATURE PAGE TO DECLARATION OF TRUST
OF
CATSKILL LITIGATION TRUST]
IN WITNESS WHEREOF, this Declaration of Trust has been executed by the
undersigned Settlors and acknowledged by the undersigned Trustees so as to be
effective on the 12th day of January, 2004.
SETTLORS:
CATSKILL DEVELOPMENT, L.L.C. MOHAWK MANAGEMENT, L.L.C.
/s/ Morad Tahbaz /s/ Robert A. Berman
- ------------------------------ -------------------------------
By: Morad Tahbaz, President By: Robert A. Berman, Manager
EMPIRE RESORTS, INC. MONTICELLO RACEWAY
DEVELOPMENT COMPANY, L.L.C.
/s/ Robert A. Berman /s/ Scott A. Kaniewski
- ------------------------------ --------------------------------
By: Robert A. Berman, By: Scott A. Kaniewski, Manager
Chief Executive Officer
TRUSTEES:
/s/ Joseph E. Bernstein /s/ Paul A. deBary
- ------------------------------ ---------------------------------
Joseph E. Bernstein, as Litigation Trustee Paul A. deBary, as Litigation Trustee
CHRISTIANA BANK & TRUST COMPANY,
not in its individual capacity but solely
as Administrative Trustee
By: /s/ James M. Young
-----------------------------
By: James M. Young
Title: Assistant Vice President
The Undersigned, Rick Werner and Laura Strache have placed our
signatures below as witnesses to the execution of this Declaration of Trust by
the above parties, each of who is personally known to us, at January 12, 2004.
/s/ Rick Werner /s/ Laura Strache
- --------------------------- ----------------------------
Witness: Witness:
21
EXHIBIT A
---------
LINE OF CREDIT
22
SCHEDULE I
----------
List of Beneficiaries
---------------------
Name Number of Units
---- ---------------
Empire Resorts, Inc.* 3,693,794
Monticello Realty, L.L.C. 5,732,261
Americas Tower Partners 6,599,294
Robert Berman 4,531,425
Debbie Berman 47,410
Berman Family Trust 142,296
Scott Kaniewski 10,217
Kaniewski Family LP 333,870
KFP Trust 395,703
Philip Berman 330,533
Brian Nastruz 10,016
Paul deBary 198,319
Gunther Arzberger 33,053
Bill Bard 33,053
Shlomo Ben-Hamoo 3,339
Daryl Cramer 8,280
Kenneth Cramer 16,560
Philip Datloff 198,319
Stephen Goldenberg 54,555
Leonard Parker 33,053
Burt Bloom 16,560
Steven Schwimmer 16,560
Bruce Rosen 33,053
Richard Rose 99,160
Kimi Sato 33,053
Robin Rose 99,160
- --------
* Held on behalf of its shareholders of record at the close of business on
January 9, 2004.
