EXHIBIT 10
October 17, 1997
Xxxxxx X. Xxxxxx, President
Xxxxxxx X. Xxxxxxxx, Xx., Esq.
Chairman, Board of Directors
Old Stone Corporation
000 Xxxxxx Xxxxxx
Xxxx Xxxxxxxxxx, R. I. 02914
Re: Old Stone Corporation v. United States
Dear Xx. Xxxxxx and Xx. Xxxxxxxx:
This letter (the "Retainer Agreement") will replace in its entirety the
October 26, 1992 Retainer Agreement among Old Stone Corporation (the
"Corporation"), Old Stone Bank, F.S.B. ("Old Stone Bank") and Xxxxxx & Xxxxxx
(the "Firm"). This Retainer Agreement shall set forth our mutual understanding
as to the basis on which the Firm's fees and related expenses will be charged
and paid with respect to legal services in connection with the litigation of
certain Winstar-Related Claims described more fully below.
The Firm will continue to represent the Corporation in connection with its
pending claims against the United States for money damages and other relief
resulting from the Government's abrogation of certain contracts. The Firm is
undertaking to represent the Corporation in asserting its claims in the United
States Court of Federal Claims ("Claims Court") and, subject to Section 5 below,
through any appeal of an order issued by the Claims Court to the U.S. Court of
Appeals for the Federal Circuit and/or the U.S. Supreme Court. Specifically, the
Firm will represent the Corporation in connection with all claims asserted by it
in the U.S. Claims Court action enumerated 92-647C (Old Stone Corporation, et
al. v. U.S.). Xxxxxx X. Xxxxxx and Xxxxxx X. Xxxxx of the Firm will be
principally responsible for the representation.
1. Incentive Fee Arrangement. In order to compensate the Firm for its
efforts in litigating the Corporation's claims, the Corporation agrees to pay
the Firm a contingent incentive fee as follows:
A. Fees For Any Litigated Judgment, and For Settlements Exceeding Fifty
Million Dollars.
(i) Incentive Fees. In the event that the Corporation obtains an award,
either directly or through Old Stone Bank or through the FDIC as receiver for
Old Stone Bank, as the result of a litigated judgment or through a settlement or
other consensual resolution of the claims in Old Stone Corporation, et al. v.
United States, 92-647C, the Corporation shall pay the Firm: (i) ten percent
(10%) of any monies (e.g., damages or restitutionary payments) from one dollar
to twenty-five million dollars ($1 - $25,000,000) comprising such award; (ii)
fifteen percent (15%) of any monies from twenty-five million to fifty million
dollars ($25,000,000 - $50,000,000); (iii) twenty percent (20%) of any monies
from fifty to one hundred million dollars ($50,000,000 - $100,000,000); and (iv)
twenty-five percent of any monies exceeding one hundred million dollars
($100,000,000).
(ii) Hourly Fees. In addition to the fees described above, the Corporation
shall pay the accrued fees for legal services rendered by the Firm, charged at
the Firm's standard hourly rates for such services, on the following terms: (i)
for recoveries of one hundred million dollars ($100,000,000) and less, accrued
fees shall be capped at one and one-half million dollars ($1,500,000), and the
Corporation shall pay a fraction of such capped accrued fees as follows: (a) for
recoveries ranging from one dollar to thirty million dollars ($1 - $30,000,000),
the Corporation shall pay one-third (1/3) of the capped accrued fees; (b) for
recoveries ranging from thirty to sixty million dollars ($30,000,000 -
$60,000,000), the Corporation shall pay two-thirds (2/3) of the capped accrued
fees; (c) for recoveries ranging from sixty to one hundred million dollars
($60,000,000 - $100,000,000), the Corporation shall pay the capped accrued fees
in full. For recoveries of more than one hundred million dollars ($100,000,000),
the Corporation shall pay the Firm its actual accrued fees without regard to any
cap on such fees.
B. Special Rules for Settlements of Fifty Million Dollars or Less.
Notwithstanding the foregoing, in the event that the Corporation obtains an
award, either directly or through Old Stone Bank or through the FDIC as receiver
for Old Stone Bank, of fifty million dollars ($50,000,000) or less through a
settlement, or other resolution of the claims in Old Stone Corporation, et al.
v. United States, 92-647C not involving the entry of a litigated judgment, the
Corporation shall pay the Firm as follows: (i) ten percent (10%) of any monies
(e.g., damages or restitutionary payments) from one dollar to twenty million
dollars ($1 - $20,000,000) comprising such award; (ii) fifteen percent (15%) of
any monies from twenty to forty million dollars ($20,000,000 - $40,000,000); and
(iii) twenty percent (20%) of any monies from forty to fifty million dollars
($40,000,000 - $50,000,000). In addition to such fees, the Corporation shall pay
the Firm its actual accrued fees for legal services rendered, calculated at the
Firm's standard hourly rates for such services, provided, however, that such
fees shall be capped at one and one-half million dollars ($1,500,000).
C. Statutory Fees. In addition to the fees set forth in Paragraphs A and B,
above, the Corporation shall pay the Firm fifty percent (50%) of any attorney
fees awarded to it pursuant to the Equal Access to Justice Act, 28 U.S.C.A. ss.
2412.
D. Fees Are In Addition To Disbursements and Costs. Client is obliged to
pay costs, as detailed in Paragraph 6 below, in addition to the incentive,
hourly and statutory fees described above. The incentive fee calculation
described above will be based on the gross amount of any judgment, settlement or
other award, without reduction for costs incurred.
E. Applicable Percentage. The portion of any judgment, settlement or other
consensual resolution payable as the contingent incentive fee shall be referred
to herein as the "Applicable Percentage."
2. Non-Monetary Consideration. In the event that the Corporation resolves
its claims against the government in whole or in part for any non-monetary
consideration, the Corporation shall compensate the Firm with a cash payment
that is equal to the appropriate percentage, as set forth in Section 1, of the
fair value of all consideration received in the resolution of the claims. The
Corporation and the Firm agree to determine the amount of this payment by
good-faith negotiation.
3. Alternative Remedy. In the event the United States Government shall in
the future create a remedy by statute or regulation or otherwise by which the
Corporation recovers on the claims the Firm has asserted on its behalf in the
Claims Court or elsewhere (or claims similar thereto), all such recoveries shall
be treated as if they were payments made to the Corporation in the litigation
undertaken by the Firm, and the Corporation shall compensate the Firm as set
forth in Section 1, above.
4. Replacement of Counsel. In the event that the Corporation replaces the
Firm as its counsel at any stage in the proceedings, the Corporation shall
compensate the Firm either in the amount of the Firm's usual and customary
hourly charges for all work performed by the Firm through the date of
replacement or, at the Firm's election, on the basis of any eventual recovery by
the Corporation (by litigated judgment or a judicial settlement or other
consensual resolution of the claims or any alternative remedy as described
above). In the event the Firm makes such election, compensation to the Firm
shall be at the levels of the incentive fees in Sections 1, 2 and 3, above.
5. Appeals. As set forth above, the Firm shall undertake to represent the
Corporation through any appeal of an order issued by the Claims Court to the
U.S. Court of Appeals for the Federal Circuit and/or the U.S. Supreme Court,
provided, however, that if the Court of Appeals for the Federal Circuit or the
Supreme Court has rendered a decision which in the Firm's professional judgment
is so adverse to the Corporation's claims as to make an appeal to either Court
by the Corporation inappropriate, the Firm shall not be bound to continue the
representation. In any such event, the Firm shall advise the Corporation of its
professional judgment and discuss the matter with the Corporation in good faith.
6. Reimbursement for Expenses. In performing this engagement, the Firm will
inevitably make disbursements and incur other internal charges on the
Corporation's behalf and for which the Corporation shall be responsible for
payment on a current basis in response to statements sent monthly. These are
likely to include such items as travel and transportation expenses (including
subsistence expenses while on travel); charges for long distance telephone
calls; express delivery and postage charges; duplicating charges; expenses
associated with overtime work; and any special computer, data processing, or
similar expenses that are beyond the capacity of the Firm's existing system. The
Firm will on a monthly basis xxxx the Corporation at cost for charges paid to
third parties. Charges for internal services will be billed at the Firm's usual
and customary rates for such services. The Firm has agreed not to include
secretarial time charges as internal charges for purposes of this engagement.
If in the course of the engagement it is necessary for the Firm to arrange
for the services of other outside counsel, experts, or consultants, or to incur
other major expenses on the Corporation's behalf, the Firm will, with the
Corporation's prior consent, arrange to have the charges for such services or
items billed directly to the Corporation, unless other arrangements are agreed
to between the Corporation and the Firm.
There is likely to be a need to retain an expert on the issue of the
damages sustained by the Corporation as the result of the Government's violation
of the Corporation's rights. In the event of the retention of such an expert,
the Corporation shall bear responsibility for paying the cost of such an expert
on a current basis. This cost shall be billed directly to the Corporation. The
Firm will work with the Corporation to identify for the Corporation's retention
an appropriate expert and to obtain from the expert a budget for the expert's
estimated time charges and expenses. The Firm will also monitor the accrued time
and expenses of the expert and report monthly or as appropriate to the
Corporation on such expert's performance compared to the estimated budget.
7. Possible Conflicts. Because of the breadth of the Firm's practice,
conflicts may arise between the Firm's clients and the Corporation on issues
that are not related to the work that the Firm does for the Corporation. The
Firm has agreed that, without the express consent of the Corporation, Xxxxxx &
Xxxxxx will not represent parties adverse to the Corporation on matters that are
substantially related to the work the Firm does for the Corporation. The
Corporation and the Firm have agreed, however, that the Firm's representation of
the Corporation will not preclude the Firm from counseling or representing (in
negotiations, litigation and otherwise) clients that have interests adverse to
the Corporation or that take positions adverse to the Corporation in matters
that are not substantially related to work the Firm does for the Corporation,
and that the Corporation will not seek to use the Firm's representation of it as
a basis for disqualifying Xxxxxx & Xxxxxx from any such representation. The firm
will confer with the Corporation if it in the future recognizes a conflict of
interest in its continued representation of the Corporation, and the Firm
expects that the Corporation will bring the matter to the Firm's attention
promptly if it recognizes any such conflicts. Without prejudging the matter, the
Corporation recognizes that under the Rules of Professional Conduct applicable
to the Firm, circumstances could arise in which the Firm would be unable to
continue to represent it, with or without its consent, as to some or all of the
issues in this matter. The Firm will make the decision concerning the nature and
extent of any such recusal by the Firm in light of all of the circumstances that
exist at the time. In the event that the Firm withdraws from its representation
of the Corporation, the Corporation shall compensate the Firm in accordance with
the principles established by this Retainer Agreement.
8. Absolute Assignment to the Firm.
A. In consideration for the agreements and undertakings made by the Firm in
this Retainer Agreement, and the terms and conditions set forth herein, and in
exchange for certain other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Corporation does hereby
absolutely and unconditionally assign, transfer, convey and set over unto the
Firm the Applicable Percentage (as defined in this Retainer Agreement) of: all
of the Corporation's right, title and interest in and to any judgment,
settlement or other consensual resolution or alternative remedy received in
connection with the Litigation, together with any and all proceeds and right to
receive proceeds from the Litigation or any judgment, settlement or other
consensual resolution or alternative remedy received in connection with or as a
result of the Litigation, and any and all other funds or property of any sort
whatsoever, regardless of the source, which may at any time be received by the
Corporation or which at any time the Corporation may have a right to receive as
a result of the Litigation or any claims or causes of action asserted or which
might be or could have been asserted therein, or otherwise in connection with
the Litigation, including, without limitation, any and all payments which may be
received in full or partial settlement of the Litigation or as a result of any
judgment, order, award or decree entered in or in connection with the Litigation
(the Applicable Percentage of any and all of the foregoing is hereinafter
referred to collectively as the "Assigned Property"); provided, however, that in
the event that the Corporation replaces the Firm as its counsel, the Firm shall
surrender any portion of this Assigned Property to the extent that such portion
of the Assigned Property is unearned and exceeds the Firm's right to a fee under
Sections 1, 2, 3 and 4 of this Retainer Agreement.
B. The foregoing absolute assignment is a present, absolute, and
unconditional assignment, conveyance and transfer of the Assigned Property and
is not, and shall not be construed to be, a collateral assignment or an
assignment to secure any debt or obligation. It is further agreed that, as a
result of this absolute assignment, the Firm shall own the Assigned Property,
and such Assigned Property shall not be the property of the Corporation. But it
is agreed that the Firm may not and will not assert in an action against the
United States any of the Firm's interests in the Assigned Property to the extent
that such assertion is barred under the Anti-Assignment Act, 31 U.S.C. ss. 3727
and 41 U.S.C ss. 15.
C. In the event that the Corporation were to become subject to any
proceeding under Title 11 of the United States Code, or any successor provision
of United States law, or any similar proceeding under state or federal law, or
any other insolvency proceeding of any sort whatsoever (any of the foregoing
being hereinafter referred to as a "Bankruptcy Proceeding"), the Assigned
Property shall not be property of the Corporation's estate, such property having
been absolutely and unconditionally assigned, transferred and conveyed to the
Firm by this absolute assignment. By way of illustration, and without in any way
limiting the foregoing, if the Corporation were to become subject to any
proceeding under Title 11 of the United States Code, the Assigned Property would
not be "property of the estate" under 11 U.S.C. ss. 541.
D. If the Corporation shall, at any time, receive any funds or other
property which constitute part of, or otherwise on account of, the Assigned
Property, the Corporation shall (i) hold such funds or other property in trust
for the Firm, (ii) immediately notify the Firm in writing of his receipt of such
funds or other property, and (iii) immediately deliver such funds or other
property to the Firm, without deduction, offset or counterclaim of any sort
whatsoever.
E. In connection with this absolute assignment, the Corporation agrees to
take any and all acts, and to execute, acknowledge and deliver to the Firm any
and all other and further documents and instruments, and further assurances,
from time to time, as the Firm may request in order better to confirm,
memorialize or perfect the assignment, conveyance, and transfer of the Assigned
Property to the Firm.
F. No other document or instrument executed in connection with or pursuant
to this Retainer Agreement or otherwise in connection with the Firm's
representation of the Corporation shall impair in any way the Firm's rights
under this absolute assignment.
G. In the event of any inconsistency between the terms set forth in this
section of the Retainer Agreement and any other provision of this Retainer
Agreement or any other provision of any document, instrument or agreement made
or entered into by the Corporation pursuant to this Retainer Agreement or
otherwise in connection with the Firm's representation of the Corporation, the
terms of this section of the Retainer Agreement shall govern and control.
H. The terms of this section of the Retainer Agreement are subject to,
limited by, and shall be construed to be consistent with the provisions of 31
U.S.C. ss. 3727 and 41 U.S.C. ss. 15. Nothing set forth in this section of the
Retainer Agreement shall (i) impair the Corporation's standing in the
Litigation; notwithstanding this absolute assignment, the Corporation (and not
the Firm) shall be a party and have the right to be a party to the Litigation;
(ii) confer upon the Firm any obligation or any right to prosecute the
Litigation in its own name; or (iii) require the Firm to take any action in
connection with the Litigation other than as may be expressly set forth in this
Retainer Agreement.
I. Nothing in this section of the Retainer Agreement shall impair or
otherwise adversely affect any equitable lien, attorney's lien or other lien on
or right with respect to any property of the Corporation (including without
limitation the Corporation's interest in the Litigation and any proceeds derived
therefrom by judgment, settlement or otherwise) to which the Firm may be
entitled by contract, at law or in equity; the rights of the Firm under the this
section of the Retainer Agreement shall be in addition to, and not in
substitution for, any such lien or right.
J. The terms of this section of the Retainer Agreement shall survive
termination of this Retainer Agreement.
9. Security Interest.
A. In consideration for the agreements and undertakings made by the Firm in
this Retainer Agreement, the Corporation hereby grants to the Firm a first
priority lien and attorney's lien on and security interest in and to all of the
Corporation's right, title and interest in and to the Litigation and any
proceeds derived therefrom by judgment, settlement or other consensual
resolution or alternative remedy or otherwise in order to secure any amounts
which are or may become due to the Firm under this Retainer Agreement, including
without limitation, any and all attorneys' fees and/or litigation costs owed the
Firm under this Retainer Agreement. The Corporation hereby grants the Firm to
file UCC Financing Statements disclosing the existence of the Firm's
above-described assignment, first priority lien, attorney's lien and security
interest. The rights of the Firm under this section of the Retainer Agreement
shall be in addition to, and not in substitution for, any other rights of the
Firm under this Retainer Agreement.
B. The terms of this section of the Retainer Agreement shall survive
termination of this Retainer Agreement.
10. Bankruptcy of The Corporation.
A. In the event that the Corporation shall at any time during the term of
this Retainer Agreement become subject to any Bankruptcy Proceeding, such
Bankruptcy Proceeding shall not in any way alter or affect any of the terms or
provisions of this Retainer Agreement, and this Retainer Agreement shall remain
in full force and effect, unaltered by such Bankruptcy Proceeding
B. The Corporation agrees and acknowledges that this Retainer Agreement is
not an executory contract which may be rejected pursuant to 11 U.S.C. ss. 365 or
otherwise. Notwithstanding the foregoing, the Corporation agrees that, in any
Bankruptcy Proceeding to which he may become subject, if any court were to
determine that this Retainer Agreement is any executory contract that could be
assumed or rejected under 11 U.S.C. ss. 365 or otherwise, the Corporation shall
assume this Retainer Agreement immediately upon commencement of such Bankruptcy
Case, unless the Firm agrees or directs otherwise in writing.
C. If the Corporation becomes subject to any Bankruptcy Proceeding during
the term of this Retainer Agreement, the Corporation agrees immediately to file
any necessary motion or application to retain and employ the Firm upon the terms
and conditions set forth in this Retainer Agreement without any alteration or
modification, except as may be agreed to by the Firm in writing, in the Firm's
sole and absolute discretion. In any Bankruptcy Proceeding of the Corporation,
the Corporation agrees that all fees and expenses of the Firm shall be an
administrative expense and shall be entitled to administrative priority in such
Bankruptcy Proceeding, and the Corporation agrees not to propose or support any
plan of reorganization or liquidation, or any other resolution of any such
Bankruptcy Proceeding, that does not afford to the Firm all of the rights to
which the Firm is entitled under the terms of this Retainer Agreement.
11. Setoffs. In the event that the United State Government withholds any
amount fro the payment of a judgment upon litigation or settlement of the claims
presented to the U.S. Court of Federal Claims (a "Withholding" or "Setoff") or
asserts a right to a Withholding or Setoff or effectuates a Withholding or
Setoff, such Withholding or Setoff shall not affect or impair any of the Firm's
rights under this Retainer Agreement. The amount of any Withholding or Setoff
shall be deducted only from the Corporation's portion of any payment made to or
for the benefit of the Corporation in connection with the Litigation or any
judgment entered or settlement reached therein. In the event of a Withholding or
Setoff, the Firm shall receive from the Corporation the same amount of legal
fees and other payments that it would have received had there been no
withholding or setoff. For example, and without in any way limiting the
foregoing, the amount of any Withholding or Setoff shall not be used to decrease
the amount of recovery used as the basis for the fee calculation set forth in
Section 1.
12. Continuing Cooperation. The Corporation hereby agrees to use all
reasonable efforts in good faith to ensure that the Firm is paid its attorneys
fees and litigation costs in accordance with the terms herein. Should that Firm
request that it do so, the Corporation agrees to execute an absolute assignment
to the Firm of the Applicable Percentage of its right, title and interest in and
to the Litigation, and each and every claim, right or cause of action asserted
in connection therewith.
13. Binding Nature. This Retainer Agreement shall be binding upon any
successor to, or any assignee of, the Corporation's interests in the litigation
referenced herein, including, without limitation, any conservator, trustee or
person holding a similar position appointed by a court to act on the
Corporation's behalf.
14. Advice of Counsel. The Corporation represents and warrants to the Firm
that it has received independent counsel with respect to the risks and benefits
of entering into this Retainer Agreement with the Firm, that such legal advice
was rendered by a qualified attorney who is not a partner in or otherwise
associated with the Firm, and that the Corporation is fully satisfied with such
legal advice.
15. Choice of Law. This Retainer Agreement shall be governed in accordance
with the laws of the District of Columbia without regard to the conflict of law
provisions thereof.
* * *
Please let us know if you have any questions about the terms of the
engagement, as described above. During the course of the engagement, please feel
free to raise promptly with us any questions you may have about our statements.
If the terms of this renewed engagement are acceptable to you, we would
appreciate it if you would sign and return to us the enclosed copy of this
letter evidencing your agreement to these terms.
Once again, let us say how pleased we are to represent you in this matter.
Sincerely,
Xxxxxx & Xxxxxx
By:/s/ Xxxxxx X. Xxxxxx
-------------------------
Xxxxxx X. Xxxxxx
ACCEPTED AND AGREED TO:
OLD STONE CORPORATION
By: /s/ Xxxxxxxxx X. Xxxxxx, President
-----------------------------------
Xxxxxxxxx X. Xxxxxx, President
By: /S/ Xxxxxxx X. Xxxxxxxx, Xx., Esq.,
-----------------------------------
Xxxxxxx X. Xxxxxxxx, Xx., Esq.,
Chairman, Board of Directors
