Case 13-13087-KG Doc 2293 Filed 03/12/19 Page 1 of 2
IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
In re: Chapter 11
FAH LIQUIDATING CORP. (f/k/a FISKER Case No. 13-13087 (KG) AUTOMOTIVE HOLDINGS, INC.), et al., (Jointly Administered) Debtors. Related to Docket No. 2283
EMERALD CAPITAL ADVISORS CORP., AS TRUSTEE FOR THE FAH LIQUIDATING TRUST,
Plaintiff,
v. Adv. Pro. No 16- 51528 (KG)
KARMA AUTOMOTIVE LLC AND
WANXIANG CLEAN ENERGY USA LLC,
Defendants. Related to Docket No. 107
NOTICE OF FILING OF REDACTED SETTLEMENT AGREEMENT WITH KARMA AUTOMOTIVE LLC AND WANXIANG CLEAN ENERGY USA LLC
PLEASE TAKE NOTICE that on February 19, 2019, Emerald Capital Advisors Corp., the Liquidating Trustee (the “Trustee”) for the FAH Liquidating Trust appointed in the above- captioned proceedings of FAH Liquidating Corp. (f/k/a Fisker Automotive Holdings, Inc.), et al., by and through his undersigned counsel, filed the Motion of Trustee for an Order Pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure Approving the Settlement of the Claims Against Karma Automotive LLC and Wanxiang Clean Energy USA LLC (collectively, “Karma”) [Docket No. 2283 / Adv. Docket No. 107].
PLEASE TAKE FURTHER NOTICE that on March 12, 2019, the Court entered the Order Permitting the Filing of a Portion of a Settlement Agreement Under Seal (the “Seal Order”) [Docket No. 2292 / Adv. Docket No. 113].
PLEASE TAKE FURTHER NOTICE that attached hereto as Exhibit A is a redacted Settlement Agreement between the Trustee and Karma.
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Dated: March 12, 2019 Respectfully submitted,
/s/ Mark Minuti Mark Minuti (DE Bar No. 2659) SAUL EWING ARNSTEIN & LEHR LLP 1201 North Market Street, Suite 2300 P.O. Box 1266 Wilmington, DE 19899 Telephone: (302) 421-6840 Facsimile: (302) 421-5873
Counsel to the Trustee
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Case 13-13087-KG Doc 2293-1 Filed 03/12/19 Page 1 of 36
EXHIBIT A
REDACTED SETTLEMENT AGREEMENT
34594155.1 03/12/2019 Case 13-13087-KG Doc 2293-1 Filed 03/12/19 Page 2 of 36 EXECUTION VERSION
SETTLEMENT AGREEMENT AND MUTUAL RELEASE OF CLAIMS
This Settlement Agreement and Mutual Release of Claims (the “Agreement”) is entered into by and among Emerald Capital Advisors Corp., as Trustee (the “Trustee”) for the FAH
Liquidating Trust (the “Trust”), Karma Automotive LLC (“Karma”), and Wanxiang Clean
Energy USA LLC (“Wanxiang” and, together with Karma, the “Defendants”).
WHEREAS, on March 21, 2014, Wanxiang and Fisker Automotive Holdings, Inc.
(“Fisker”) entered into the limited liability company agreement (the “LLC Agreement,” as further defined below) that created Karma;
WHEREAS, under the LLC Agreement, Fisker acquired an equity interest in Karma, consisting of 200 Common Units and 200 Series B Preferred Units (the “Fisker Units”), and
Wanxiang acquired the remaining equity interest in Karma, consisting of 800 Common Units,
800 Series B Preferred Units, and 1,000 Series A Preferred Units;
WHEREAS, on July 28, 2014, the United States Bankruptcy Court for the District of
Delaware (the “Bankruptcy Court”) entered an order confirming the Second Amended Joint Plan of Liquidation (the “Plan”) in the action styled In re FAH Liquidating Corp. (f/k/a Fisker
Automotive Holdings, Inc.), et. al., Case No. 13-13087 (KG) (Bankr. D. Del.);
WHEREAS, pursuant to the Plan, the Trust obtained the Fisker Units;
WHEREAS, on September 6, 2016, Wanxiang and Karma entered into a Capital
Contribution Agreement (the “Prior CCA”) pursuant to which Karma issued additional Series A
Preferred and Common Units to Wanxiang and sent the Trust Preemptive Rights Letters in which
Wanxiang offered to sell some of its recently acquired Units to the Trust in order for the Trust to maintain its equity position in Karma; Case 13-13087-KG Doc 2293-1 Filed 03/12/19 Page 3 of 36 EXECUTION VERSION
WHEREAS, the Trust did not participate in the Prior CCA and the Trustee filed on behalf of the Trust a lawsuit against Defendants on November 23, 2016, Adv. Pro. No. 16-51528 (KG)
(Bankr. D. Del.), asserting claims against Defendants for declaratory judgment, breach of fiduciary duty, breach of contract, breach of implied covenant of good faith and fair dealing, and promissory estoppel, relating to the Prior CCA and the dilution of the Trust’s equity interest in
Karma (the “Lawsuit”);
WHEREAS, on March 20, 2017, Defendants moved to dismiss the complaint for failure to state a claim;
WHEREAS, on December 4, 2017, the Bankruptcy Court issued an Opinion and Order ruling that the LLC Agreement authorizes Karma to issue additional Common Units to
Wanxiang, but denying the motion to dismiss on other grounds;
WHEREAS, Defendants executed a new Capital Contribution Agreement dated as of
April 23, 2018 (the “New CCA”) that purported to rescind and nullify the Prior CCA and Karma issued a Preemptive Notice to the Trust with an offer for the Trust or its assignee to purchase up to the Trust’s pro rata share of the newly-issued Series A Preferred and Common Units on the same terms as Wanxiang;
WHEREAS, the Trust conducted due diligence on the offer contained in the Preemptive
Notice issued in connection with the New CCA, and Karma responded to information requests from the Trustee and made its personnel and facilities available to the Trustee;
WHEREAS, the Trust declined to exercise its preemptive rights to participate in the New
CCA or assign its rights to the same and its equity interest in Karma was diluted as a result;
WHEREAS, the Trustee filed an amended complaint in the Lawsuit on October 5, 2018, asserting the same five claims against Defendants as the original complaint and asserting a new
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WHEREAS, Defendants have denied the Trustee’s claims, and continue to deny any responsibility or liability of any kind in connection with the Lawsuit;
WHEREAS, the Parties engaged in litigation for more than two years, including extensive motion practice and discovery;
WHEREAS, discovery was scheduled to be completed on May 17, 2019, and trial of the
Lawsuit was scheduled to commence on December 2, 2019;
WHEREAS, the Parties desire to fully and finally settle any and all disputes and controversies among them arising out of or relating in any way to the Lawsuit or the Trust’s equity interest in Karma and to achieve general peace between the Trust and Defendants;
WHEREAS, the Parties desire to fully and finally end the Trust’s membership and investment in, and involvement with, Karma, and Wanxiang desires to purchase the Fisker Units from the Trust;
NOW, THEREFORE, IT IS HEREBY STIPULATED AND AGREED, by and among the Parties to this Agreement, in consideration of the mutual promises and covenants contained in this Agreement, and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, that the Trustee’s claims against Defendants shall be compromised, settled, and released upon and subject to the following terms; and further, that the Trust’s Fisker
Units shall be purchased by Wanxiang subject to the following terms:
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1. DEFINITIONS
1.1. “Claims” means any and all manner of actions, causes of actions, rights, suits, obligations, claims, debts, demands, agreements, promises, liabilities, controversies, costs, expenses, and attorneys’ fees whatsoever, whether in law or equity and whether based on any federal law, state law, local law, statutory law, common law, foreign law right of action, or any other law, rule, or regulation, whether fixed or contingent, foreseen or unforeseen, known or unknown (including without limitation all Unknown Claims, as defined below), including, without limitation, those relating to or arising out of any claims that were asserted or could have been asserted in the Lawsuit relating to or arising out of the Fisker Units.
1.2. “Defendant Released Persons” means Karma Automotive LLC, Wanxiang Clean
Energy USA LLC, and (each in its capacity as such) all of their respective past, present, and future parent companies, subsidiaries, affiliates, divisions, employees, servants, members, partners, principals, officers, shareholders, and owners, and all of their respective heirs, executors, administrators, insurers, coinsurers, reinsurers, joint ventures, personal representatives, predecessors, successors, transferees, attorneys, agents, representatives, assigns, and all other persons acting or purporting to act on behalf of any of them.
1.3. “Defendant Releasors” means Karma Automotive LLC, Wanxiang Clean Energy
USA LLC, and (each in its capacity as such) all of their respective past, present, and future parent companies, subsidiaries, affiliates, divisions, employees, servants, members, partners, principals, officers, shareholders, and owners, and all of their respective heirs, executors, administrators, insurers, coinsurers, reinsurers, joint ventures, personal representatives, predecessors, successors, transferees, attorneys, agents, representatives, assigns, and any other person or entity claiming through or on behalf of any of them.
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1.4. “Effective Date” means the first business day after the date on which the
Bankruptcy Court enters an order approving the terms of this Agreement.
1.5. “LLC Agreement” means that Limited Liability Company Agreement for
Wanxiang Automotive Acquisition Company LLC, dated as of March 21, 2014, as amended.
1.6. “Party” or “Parties” means, respectively, each or all of the Trustee, Karma, and
Wanxiang.
1.7. “Trust Releasors” means Emerald Capital Advisors Corp., in its capacity as
Trustee for the Trust, and the Trust and (each in its capacity as such) all of their respective past, present, and future parent companies, subsidiaries, affiliates, divisions, employees, servants, members, partners, principals, officers, beneficiaries, shareholders, and owners, and all of their respective heirs, executors, administrators, insurers, coinsurers, reinsurers, joint ventures, personal representatives, predecessors, successors, transferees, attorneys, agents, representatives, assigns, and all other persons acting or purporting to act on behalf of any of them.
1.8. Other capitalized terms herein have the meaning assigned to them in the LLC
Agreement.
2. FULL AND FINAL DISPOSITION
The Parties to this Agreement intend it to be a final and complete resolution of all Claims or potential Claims that the Parties have, or purport to have, against each other that relate in any way to, or arise out of, the Lawsuit and the Trust’s Fisker Units, and for Wanxiang to purchase the Trust’s Fisker Units with the effect of ending the Trust’s membership and investment in, and involvement with, Karma.
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3. SETTLEMENT PAYMENT AND RELEASE
3.1. In full and final settlement of any and all Claims, and in exchange for the transfer of all of the Trust’s Fisker Units to Wanxiang, and with no admissions of any liability or responsibility, Defendants will within fifteen (15) business days after the Effective Date (the
RED “Wire Date”) pay or cause to be paid to the Trustee, for the benefit of the Trust, the sum of ACT
without deduction or withholding for any taxes (the “Settlement
Amount”); provided, however, that on or before the Effective Date, the Trustee’s counsel shall have provided to counsel for Defendants routing instructions for the above referenced payment as well as completed IRS Forms W-9 or such other tax-related information as may be requested by Defendants.
3.2. The Trust, in consideration of the agreements and covenants contained in this
Agreement, will be deemed to have irrevocably sold, assigned, transferred, and delivered unto
Wanxiang, and Wanxiang will be deemed to have purchased, accepted, and assumed from the
Trust, complete record and beneficial ownership of the Trust’s Fisker Units, together with all rights and obligations as a Member of Karma associated therewith, as of the Trustee’s receipt of the payment described in Section 3.1 in good funds. In recognition of such sale, assignment, and transfer, the Trustee shall deliver or cause to be delivered to Wanxiang, on or prior to the date of the payment described in Section 3.1, an instrument of assignment, duly executed by the Trustee, in substantially the form attached hereto as Exhibit A.
3.3. Effective and contingent upon the Trustee’s receipt of the Settlement Amount in good funds, the Trust Releasors, in consideration of the agreements and covenants contained in this Agreement, hereby release and forever discharge the Defendant Released Persons from any and all actions, causes of action, rights, suits, obligations, claims, debts, demands, agreements,
6 Case 13-13087-KG Doc 2293-1 Filed 03/12/19 Page 8 of 36 EXECUTION VERSION promises, liabilities, controversies, costs, expenses, and attorneys’ fees whatsoever in any way that the Trust Releasors ever had or now have against the Defendant Released Persons and which relate to, or which are in any way based upon or arise from or are in any way connected with the
Claims.
3.4. The Defendant Releasors, in consideration of the agreements and covenants contained in this Agreement, hereby release and forever discharge the Trust Releasors from any and all actions, causes of action, rights, suits, obligations, claims, debts, demands, agreements, promises, liabilities, controversies, costs, expenses, and attorneys’ fees whatsoever in any way that the Defendant Releasors ever had or now have against the Trust Releasors and which relate to, or which are in any way based upon or arise from or are in any way connected with the
Claims. For the avoidance of doubt, the Defendant Releasors release any claim(s) for contribution, indemnification or subrogation or other similar claims that it may have with respect to the amounts paid under this Agreement.
3.5. Each Party covenants and agrees never to commence, directly or indirectly, any suit, investigation, inquiry, or other form of action or proceeding of any kind or nature whatsoever against or involving each other Party or their respective officers, directors, members, stockholders, agents, advisors, principals, representatives, employees, assigns, insurers, beneficiaries, predecessors and successors in interest based upon the Claims released by this
Agreement.
3.6. The Parties intend and agree that the releases granted in this Agreement shall be effective as a bar to any and all currently unsuspected, unknown, or partially known Claims.
Accordingly, the Parties expressly waive any and all rights and benefits conferred upon them by the provisions of California Civil Code § 1542, which provides in pertinent part:
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A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.
The Parties also expressly waive any and all provisions, rights, and benefits conferred by any state or territory in the United States of America, or any other nation, or by the Restatements of the Law or by any principle of common law that is similar, comparable, or equivalent to
California Civil Code § 1542. Although the Parties may hereafter discover facts in addition to or different from those that any of them now knows or believes to be true with respect to the subject matter of the Lawsuit or the Trust’s equity interest in Karma, the Parties have fully, finally, and forever settled and released any and all claims, known or unknown, suspected or unsuspected, contingent or noncontingent, whether or not concealed or hidden, that now exist or heretofore have existed upon any theory of law or equity relating to the Lawsuit or the Trust’s equity interest in Karma, including, but not limited to, with respect to conduct that is negligent, reckless, intentional, with or without malice, or a breach of any duty, law, or rule, without regard to the subsequent discovery or existence of such different or additional facts. The Parties acknowledge that the inclusion of such “Unknown Claims” in this Agreement was separately bargained for and was a key element of the Agreement.
3.7. The Parties specifically retain their right to any and all actions, causes of action, rights, suits, obligations, claims, debts, demands, agreements, promises, liabilities, controversies, costs, expenses, and attorneys’ fees whatsoever that arise from the breach of this Agreement or that arise after the Effective Date of this Agreement.
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4. REPRESENTATIONS AND WARRANTIES
4.1. The Parties represent and warrant that, as of the Effective Date of this Agreement,
with knowledge that all parties to this Agreement are relying thereon, this Agreement constitutes
a legal, valid, and binding obligation on each Party, and is enforceable against each Party in
accordance with its terms.
4.2. Each of the Parties further represents and warrants the following:
a. Each Party has carefully read and reviewed with its attorneys, and knows and fully understands the full contents of, this Agreement, each Party has received independent legal advice from his, her, or its attorneys with respect to the advisability of making the settlement and release provided for herein and with respect to the advisability of executing the
Agreement, and each Party is voluntarily executing this Agreement upon the advice of that
Party’s attorneys;
b. No Party has relied upon any statement, representation, admission, inducement, or promise of an adverse Party, or any officer, agent, employee, representative, or attorney for any adverse Party in executing this Agreement or in making the settlement and release provided for herein, including with respect to the decision to buy, sell, or transfer Units in
Karma, except as expressly stated in this Agreement; and
c. Each Party has investigated the facts pertaining to the settlement and release and this Agreement and all matters pertaining thereto to the full extent it deems necessary for the purpose of executing this Agreement.
d. Each Party has reviewed with its own tax advisors the federal, state, local, and foreign tax consequences of the Agreement. Each Party relies solely on such advisors and not on any statements or representations of any adverse Party or adverse Party’s agent. Each
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Party understands that it shall be responsible for its own tax liability that may arise as a result of this Agreement.
4.3. The Trustee, on behalf of the Trust, hereby represents and warrants that the Trust is a person, or has had access to the advice of a person, who is knowledgeable and sophisticated as to investments in securities and has made an informed decision regarding the disposition of its
Fisker Units.
4.4. The Trustee, on behalf of the Trust, hereby represents and warrants that the Fisker
Units are owned of record and beneficially by the Trust, free and clear of all security interests, pledges, hypothecations, mortgages, claims, liens, deeds of trust, charges, purchase rights, options, or other similar property interests or encumbrances (all of the foregoing,
“Encumbrances”). The Trustee further represents and warrants that the Trust is not subject to any legal restriction or a party to any option, warrant, purchase right, or other contract or commitment that would restrict or limit the transfer of the Trust’s Fisker Units to Wanxiang or require the Trust or Wanxiang to sell, transfer, or otherwise dispose of any Fisker Units. Upon the payment by Wanxiang described in Section 3.1, title to the Trust’s Fisker Units shall pass to
Wanxiang, free and clear of all Encumbrances.
5. CONFIDENTIALITY
5.1. The Parties agree that the Agreement, terms of the Agreement, and Settlement
Amount shall be kept strictly confidential and shall not be disclosed to anyone except as specifically provided in subparts (a)-(e) below.
a. The Parties may disclose the Agreement, terms of the Agreement, or
Settlement Amount to their attorneys, accountants, beneficiaries, financial consultants, and regulators, to the extent necessary for ordinary business purposes. Provided, however, that
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disclosure to the Trust’s beneficiaries is limited to the information required by law for tax
reporting purposes. The Trust may disclose the Agreement, the terms of the Agreement, or the
Settlement Amount to the representatives on the Trust’s Oversight Committee. Any person
given access to information regarding the Agreement, the terms of the Agreement, or the
Settlement Amount pursuant to this Section 5.1(a) shall be advised by the providing Party that such information is confidential. In the event of the unauthorized disclosure by a recipient of information pursuant to this Section 5.1(a), the Party providing such information shall be liable for, and shall pay, the reasonable legal fees, costs and expenses of each non-breaching party in enforcing this Agreement.
b. The Parties may disclose the Agreement to the Bankruptcy Court, provided that such disclosure shall be accompanied by a request to review the Agreement in camera or a motion to seal the disclosure, as set forth in Section 6.1 below.
c. In connection with its reporting obligations under Sections 6.3 and 6.4 of the Liquidating Trust Agreement, filed August 4, 2014, by and among FAH Liquidating Corp. and FA Liquidating Corp., and Emerald Capital Advisors Corp. as trustee, the Trust will move the Bankruptcy Court for an order allowing it to redact from the public docket any information reflecting or referring to the Agreement, the terms of the Agreement, or the Settlement Amount
(provided, however, that it is not a condition to this Agreement or the Parties’ performance that the Bankruptcy Court enter such order or grant any other relief as to the same).
d. The Trust may disclose the Agreement, terms of the Agreement, or
Settlement Amount to the United States Trustee upon request, provided that such disclosure shall be accompanied by a request to keep the Agreement, terms of the Agreement, and Settlement
Amount confidential to the fullest extent permitted by law or regulation.
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e. In the event any Party receives a validly issued subpoena or document
request, or an inquiry from a state or federal regulator, seeking production of the Agreement,
terms of the Agreement, or Settlement Amount, such Party shall promptly advise the requesting
person that the Agreement, terms of the Agreement, and Settlement Amount are confidential and
shall also promptly inform the other Parties to this Agreement of the subpoena, document
request, or regulatory inquiry. Upon the request of any other Party to this Agreement, the Party
receiving the subpoena, document request, or regulatory inquiry shall object to production of the
Agreement, terms of the Agreement, or Settlement Amount (the “Objection”) in order to enable
such other Party to take such actions as it may deem appropriate to protect the confidentiality of the Agreement, terms of the Agreement, and Settlement Amount. The reasonable costs and expenses of preparing, filing and presenting the Objection shall be borne by the Party requesting
the Objection.
f. As to any circumstances not covered by subparts 5.1(a), (b), (c), (d), or (e)
above, any Party that receives an inquiry relating in any way to the Agreement, terms of the
Agreement, or Settlement Amount shall either decline to respond or shall state only the
following: “The matter has been resolved on mutually acceptable terms.”
5.2. Each Party expressly represents that, other than as permitted in this Section 5, he
and/or it has, as of the Effective Date, not disclosed the terms of the Agreement, terms of the
Agreement, or Settlement Amount to any other person or entity.
5.3. The Parties acknowledge that Sections 5.1 and 5.2 of this Agreement were
separately bargained for and are material terms of this Agreement. The Parties further
acknowledge that a violation of Section 5.1 or 5.2 by any Party will cause irreparable harm to the
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other Parties and therefore, in the event of any such violation, each of the non-breaching Parties
will be entitled to injunctive relief and specific performance.
5.4. The Parties agree that the terms of the Agreed Protective Order entered by the
Court on January 8, 2018, in the Lawsuit shall survive this Agreement. Pursuant to Section 9 of
the Agreed Protective Order, within 90 days after receiving notice of an order ending the
Lawsuit, each Party shall make reasonable efforts to identify Confidential Discovery Material
and either (a) return to the producing party all Confidential Discovery Material and Derivative
Information, as defined in the Agreed Protective Order, or (b) provide written confirmation to the
producing party that all such material has been destroyed.
6. OTHER PROVISIONS
6.1. Approval: Within three Business Days of the date hereof, the Trustee shall file
with the Bankruptcy Court a Motion for Order Approving the Settlement Pursuant to Rule 9019
of the Federal Rules of Bankruptcy Procedure substantially in the form attached hereto as
Exhibit B (the “Approval Motion”). The Trustee shall request that the Bankruptcy Court review
the Agreement in camera. If the Bankruptcy Court requests that the Agreement be filed on the
Bankruptcy Court’s docket, the Trustee shall file with the Bankruptcy Court a motion
authorizing it to file the Agreement under seal (the “Motion to Seal”). In the event the
Bankruptcy Court does not authorize the Agreement to be filed under seal, the Trustee may file the Agreement if so ordered by the Bankruptcy Court. For purposes of clarity, the Parties understand and agree that the Bankruptcy Court’s failure to approve the Motion to Seal shall not
relieve any Party from their obligations under this Agreement.
6.2. Withdrawal: Within three Business Days of the Wire Date, the Parties shall file
with the Bankruptcy Court a joint stipulation dismissing the Lawsuit with prejudice.
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6.3. Fees and Cost: Each Party will bear its own attorneys’ fees and expenses related to the Lawsuit and the settlement. The Parties agree that, upon dismissal, they will not appeal from any ruling made during the course of the Lawsuit or from the order dismissing the lawsuit with prejudice.
6.4. Heirs and Successors: All the terms and provisions of this Agreement shall be binding upon and shall inure to the benefit of, and shall be enforceable by the respective heirs, successors, and assigns of the Parties.
6.5. Compromise Settlement: Neither this Agreement nor any of the actions to be taken pursuant hereto shall be construed as or be deemed to be evidence of an admission of liability or wrongdoing on the part of any person with respect to the Claims, or of any fault or liability of wrongdoing or damage whatsoever, or any infirmity in the claims or defenses asserted by any Party in the Lawsuit.
6.6. Entire Agreement: The Parties agree that the Agreement constitutes the entire agreement and understanding among the Parties concerning the settlement of the Lawsuit. Each
Party further agrees, acknowledges, and expressly warrants that no information, statement, promise, representation, warranty, condition, inducement, or agreement of any kind, whether oral or written, made by or on behalf of any other Party shall be, or has been, relied upon by it unless specifically contained and incorporated herein. There is no other agreement related to the subject of this Agreement.
6.7. Warranty of Non-Assignment: The Trustee, Karma, and Wanxiang each represent and warrant that they are the sole owner of the Claims they release in this Agreement, that they have the capacity and full authority to make this Agreement, and that no portion of the
Claims they release in this Agreement have been sold, transferred, assigned, or conveyed to any
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Persons. Defendants agree to indemnify the Trust Releasors should any third party to whom any
Claim asserted in the Lawsuit has been sold, transferred, assigned, or conveyed by the Defendant
Releasors bring any suit or claim against any of the Trust Releasors.
6.8. Amendments: This Agreement may be amended only by a writing signed on behalf of each of the Parties to whom such amendment applies or their successors-in-interest.
6.9. No Third Party Beneficiaries: There are no third party beneficiaries to this
Agreement except as expressly provided herein.
6.10. Counterparts: This Agreement may be executed in counterpart originals, each of which shall be deemed to be an original with the same effect as if the signature thereto were on the same instrument. Scanned and emailed signatures will be accepted as originals and, in the event of any dispute concerning this Agreement pursuant to Section 3.7 above, no Party shall challenge the authenticity of such signatures on the basis that they were scanned and emailed.
6.11. Choice of Law: This Agreement shall be controlled by and shall be construed in accordance with the substantive law of Delaware, without regard to choice of law or conflict of law principles.
6.12. Severability: Each provision of this Agreement is intended to be severable. If any provision of the Agreement, other than Section 3 or any of its subparts, is declared to be invalid for any reason, such invalidity shall not affect the remaining provisions of the Agreement or the enforceability thereof.
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6.13. Headings: The headings of the sections herein are for convenience only and do
not define, limit, or construe the contents of this Agreement.
6.14. Authority to Execute: Each person executing this Agreement on behalf of any
Party hereto hereby represents and warrants that he or she has the full authority to do so and
thereby to bind the Party or Parties, and the respective Releasors, on whose behalf he or she
signs.
6.15. Jointly Drafted: The Agreement shall not be construed more strictly against one
Party than another merely by virtue of the fact that it, or any part of it, may have been prepared
by counsel for one of the Parties, it being recognized that it is the result of arms-length negotiations between the Parties and all Parties have contributed substantially and materially to the preparation of this Agreement.
6.16. Waiver: The waiver of any Party or Parties of any breach of this Agreement by
any other Party or Parties shall not be deemed a waiver of any other prior or subsequent breach
of this Agreement.
6.17. Survival: All agreements, representations, and warranties herein survive the
execution and delivery of this Agreement, the payment made thereto, and the dismissal of the
Lawsuit.
6.18. Notice: Any notice, confirmation, demand, request, or other communication
which is permitted, required, or desired to be given in connection with this Agreement must be in
writing and shall be deemed to be duly given when (a) personally delivered, (b) deposited in the
mail, certified or registered, return receipt requested, postage prepaid, addressed to the Parties at
the following addresses (or at such other address as shall be given in writing), or (c) emailed to
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If to the Trustee:
William Baldiga, Esq. Brown Rudnick LLP Seven Times Square New York, NY 10036 [email protected]
If to Defendants:
Melanie E. Walker, Esq. Sidley Austin LLP One South Dearborn Chicago, IL 60603 [email protected]
and
Bojan Guzina, Esq. Sidley Austin LLP One South Dearborn Chicago, IL 60603 [email protected]
[………………… signatures on the following page …………………]
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Exhibit A Case 13-13087-KG Doc 2293-1 Filed 03/12/19 Page 23 of 36
Form of Instrument of Assignment
ASSIGNMENT OF INTEREST
WHEREAS under the Settlement Agreement and Mutual Release of Claims, dated as of February [●], 2019 (the “Agreement”), by and among Wanxiang Clean Energy USA LLC (“Wanxiang”), Karma Automotive LLC (“Karma”), and Emerald Capital Advisors Corp., as Trustee (the “Trustee”) for the FAH Liquidating Trust (the “Trust”), the Trust has agreed to sell to Wanxiang, and Wanxiang has agreed to purchase from the Trust, on the terms and subject to the conditions stated in the Agreement, the Trust’s equity interest in Karma, consisting of 200 Common Units and 200 Series B Preferred Units (the “Fisker Units”) without warranty, representation and/or recourse of any kind except those expressly provided for in the Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Trust hereby irrevocably sells, assigns, transfers, and delivers unto Wanxiang the Fisker Units.
Dated: ______, 2019
FAH Liquidating Trust by Emerald Capital Advisors Corp., solely in its Capacity as Trustee.
By: Name: John P. Madden Title: Senior Managing Director
Case 13-13087-KG Doc 2293-1 Filed 03/12/19 Page 24 of 36
Exhibit B Case 13-13087-KG Doc 2293-1 Filed 03/12/19 Page 25 of 36
IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
Chapter 11 In re:
Case No. 13-13087 (KG) FAH LIQUIDATING CORP. (f/k/a FISKER
AUTOMOTIVE HOLDINGS, INC.), , et al. Jointly Administered
Debtors.1
MOTION OF TRUSTEE FOR AN ORDER PURSUANT TO RULE 9019 OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE APPROVING THE SETTLEMENT OF THE CLAIMS AGAINST KARMA AUTOMOTIVE LLC AND WANXIANG CLEAN ENERGY USA LLC
Emerald Capital Advisors Corp., in its capacity as trustee (the “Trustee”) of the FAH
Liquidating Trust (the “Trust”) established in the chapter 11 cases of FAH Liquidating Corp.
(f/k/a Fisker Automotive Holdings, Inc.) and FA Liquidating Corp. (f/k/a Fisker Automotive,
Inc.) (together, the “Debtors”), hereby requests this Honorable Court to enter an order, pursuant
to Rule 9019 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”),
(i) approving the settlement agreement and mutual release dated February 15, 2019 (the
“Settlement Agreement”), which is being submitted for in camera review contemporaneously
herewith, of the claims filed and otherwise asserted against Karma Automotive LLC (“Karma”)
and Wanxiang Clean Energy USA LLC (“Wanxiang” and, together with the Trustee, the Trust,
and Karma, the “Parties”) by the Trustee, and (ii) authorizing the Trustee to redact information
reflecting or referring to the Settlement Agreement, the terms of the Settlement Agreement or the
settlement amount from future reports and other filings with the Court, including but not limited
1 The Debtors, together with the last four digits of each Debtor’s federal tax identification number, are FAH Liquidating Corp. (f/k/a Fisker Automotive Holdings, Inc.) (9678) and FA Liquidating Corp. (f/k/a Fisker Automotive, Inc.) (9075). The service address for the Debtors is 3080 Airway Avenue, Costa Mesa, California 92626. Case 13-13087-KG Doc 2293-1 Filed 03/12/19 Page 26 of 36
to future post confirmation quarterly reports. As discussed in greater detail herein, the
Settlement Agreement resolves all claims asserted by the Trustee against Karma and Wanxiang, including the claims asserted in the Action (as defined below). In support of this Motion, the
Trustee respectfully represents as follows:
INTRODUCTION
1. The Trustee, on behalf of the Trust, has filed various claims against Karma and
Wanxiang, which have resulted in the adversary proceeding captioned: Emerald Capital Advisors
Corp. v. Karma Automotive LLC et al, Adv. Pro. No. 16-51528 pending in United States
Bankruptcy Court for the District of Delaware (the “Action”). Namely, the Trustee alleges that
Karma and Wanxiang improperly sought to dilute the Trust’s 20% equity interest in Karma, and thus alleges causes of action including breach of fiduciary duty, breach of contract, breach of implied covenant of good faith and fair dealing, promissory estoppel, and tortious interference with a prospective business relationship. Karma and Wanxiang deny any liability with respect to these claims. The Parties have agreed to resolve all claims asserted by the Trustee against Karma and
Wanxiang, including the claims asserted in the Action.
2. This Court should apply the governing Martin2 standard and its progeny to approve the Settlement Agreement. The Settlement Agreement is fair, reasonable, and in the best interest of the Trust, because it (a) will resolve the Action; (b) will facilitate a final distribution to beneficiaries of the Liquidating Trust; (c) will avoid the potential for appeals of what has already been complex and protracted litigation, with their attendant expense, inconvenience, and delay, and (d) strikes a proper balance between the possibility of success of additional litigation and the value to the Trust of the proposed compromise.
2 In re Martin, 91 F.3d 389, 393 (3d. Cir. 1996).
2 Case 13-13087-KG Doc 2293-1 Filed 03/12/19 Page 27 of 36
3. For these reasons, and the others set forth below, the Trustee submits that approval of the Settlement Agreement by the Court is warranted.
JURISDICTION AND VENUE
4. This Court has jurisdiction to consider this matter pursuant to 28 U.S.C. §§ 157 and 1334. This is a core proceeding pursuant to 28 U.S.C. § 157(b)(2) and the Liquidating
Trustee consents pursuant to Local Rule 9013(f) to entry of a final order by the Court in connection with this Motion to the extent that it is later determined that this Court, absent consent of the parties, cannot enter final orders or judgments in connection herewith consistent with Article III of the United States Constitution.
5. Venue is proper pursuant to 28 U.S.C. §§ 1408 and 1409.
6. The statutory predicates for the relief requested by this Motion are Bankruptcy
Rule 9019 and section 105(a) of Title 11 of the United States Code (the “Bankruptcy Code”).
BACKGROUND
A. General Background
7. On November 22, 2013 (the “Petition Date”), the Debtors each filed voluntary petitions (the “Bankruptcy Cases”) for relief under Chapter 11 of Title 11 of the Bankruptcy
Code in this Court.
8. On March 21, 2014, Wanxiang and Fisker Automotive Holdings, Inc. entered into that certain limited liability company agreement that created Karma (the “LLC Agreement”).
9. Under the LLC Agreement, the Debtors acquired a 20% equity interest in Karma, consisting of 200 Common Units and 200 Series B Preferred Units (the “Fisker Units”).
3 Case 13-13087-KG Doc 2293-1 Filed 03/12/19 Page 28 of 36
10. On July 28, 2014, this Court entered an order confirming the Debtors’ Second
Amended Joint Plan of Liquidation Pursuant to Chapter 11 of the Bankruptcy Code (with
Technical Modifications) (the “Plan”).
11. Under the Plan, the LLC Agreement was assumed and assigned to the Trust and the
Trustee took ownership, for the benefit of the Debtors’ unsecured creditors, of the Fisker Units, as transferee and assignee of, and successor-in-interest to, the Debtors.
12. On September 6, 2016, Karma and Wanxiang entered into a capital contribution
agreement (the “Prior CCA”) and subsequently issued preemptive rights letters to the Trust (the
“First Preemptive Rights Letters”).
13. On April 23, 2018, Karma and Wanxiang entered into a second capital contribution agreement (the “New CCA,” and together with the Prior CCA, “the Capital Contribution
Agreements”) and subsequently issued a preemptive rights letter to the Trust (the “New Preemptive
Rights Letter” and, together with the First Preemptive Rights Letters, the “Preemptive Rights
Letters”).
B. The Trust’s Claims
14. On November 23, 2016, the Trustee, on behalf of the Trust, commenced the Action and asserted various claims, as amended, against Karma and Wanxiang arising out of or relating to
the LLC Agreement, the Plan, the Capital Contribution Agreements and the Preemptive Rights
Letters.
15. Specifically, the Trustee alleges that Karma and Wanxiang improperly sought to
dilute the Trust’s 20% equity interest, and thus alleges causes of action including breach of fiduciary
duty, breach of contract, breach of implied covenant of good faith and fair dealing, promissory
4 Case 13-13087-KG Doc 2293-1 Filed 03/12/19 Page 29 of 36
estoppel, and tortious interference with a prospective business relationship. Karma and Wanxiang
deny any liability with respect to these claims.
C. Settlement Agreement
16. The Parties desire to effect a final settlement and resolution of any and all matters between them without the expense, delay, or uncertainty of further litigation.
17. As set forth in the Settlement Agreement,3 Karma and Wanxiang will pay a
confidential settlement amount to the Trust. In addition, the Trustee will transfer the Trust’s
interests, rights and obligations under the LLC Agreement to Wanxiang, including, but not
limiting to, transferring the Fisker Units to Wanxiang.
18. The Settlement Agreement also includes broad, mutual, general releases.
RELIEF REQUESTED
19. By this Motion, the Trustee requests entry of an Order, substantially in the form
attached hereto as Exhibit A, approving the Settlement Agreement pursuant to Bankruptcy Rule
9019(a). In addition, given the sensitive nature of the terms of the Settlement Agreement, as
more fully described in the Motion of Trustee for Entry of an Order Permitting In Camera
Review of Settlement Agreement filed contemporaneously herewith, the Trustee respectfully
requests authority to redact information reflecting or referring to the Settlement Agreement, the
terms of the Settlement Agreement or the settlement amount from future reports and other filings
with the Court, including but not limited to future post confirmation quarterly reports.
3 The description of the proposed Settlement Agreement in this Motion is only a summary. The Settlement Agreement controls in all instances to the extent the summary is incomplete, inaccurate or conflicts with the Settlement Agreement. The Parties are simultaneously making the Settlement Agreement available in camera to the Court.
5 Case 13-13087-KG Doc 2293-1 Filed 03/12/19 Page 30 of 36
BASIS FOR RELIEF
20. Section 105(a) provides, in pertinent part, that “[t]he court may issue any order
. . . necessary or appropriate to carry out the provisions of [the Bankruptcy Code].” In turn,
Bankruptcy Rule 9019(a) provides that “on motion by the trustee and after a hearing, the Court
may approve a compromise or settlement.” Fed. R. Bankr. P. 9019(a).
21. Settlement of time-consuming and burdensome litigation, especially in the
bankruptcy context, is encouraged. See In re Penn Cent. Transp. Co., 596 F.2d 1127, 1146 (3d
Cir. 1979); In re Sassalos, 160 B.R. 646, 653 (D. Or. 1993) (stating that “compromises are
favored in bankruptcy, and the decision of the bankruptcy judge to approve or disapprove a compromise … rests in the sound discretion of the judge”). The Supreme Court has recognized that “in administering reorganization proceedings in an economical and practical manner, it will often be wise to arrange the settlement of claims as to which there are substantial and reasonable doubts.” In re Protective Comm. for Indep. Stockholders of TMT Trailer Ferry, Inc. v. Anderson,
390 U.S. 414, 424 (1968); see In re Penn Cent. Transp. Co., 596 F.2d at 1146. The district court, as the intermediate bankruptcy appellate court, “has described the ultimate inquiry to be whether ‘the compromise is fair, reasonable, and in the interest of the estate.’” In re Marvel
Entertainment Group, Inc., 222 B.R. 243, 249 (D. Del. 1998), quoting In re Louise’s, Inc., 211
B.R. 798, 801 (D. Del. 1997). Bankruptcy Rule 9019 thus empowers this Court to approve
compromises and settlements if they are in the “best interest[s] of the estate.” In re Marvel
Entertainment Group, 222 B.R. at 249 (holding that proposed settlement was in the best interest
of the estate); see In the Matter of Energy Cooperative, Inc., 886 F.2d 921, 927 (7th Cir. 1989).
22. In determining whether to approve a motion or application to settle a controversy,
a Bankruptcy Court must determine whether it is fair, reasonable and adequate by examining the
6 Case 13-13087-KG Doc 2293-1 Filed 03/12/19 Page 31 of 36
following four factors: (i) the probability of success in the litigation; (ii) the complexity, expense
and likely duration of the litigation; (iii) all other factors relevant to making a full and fair
assessment of the wisdom of the proposed compromise; and (iv) whether the proposed
compromise is fair and equitable to the debtors, their creditors, and other parties in interest. See
TMT Trailer Ferry, Inc., 390 U.S. at 424; In re Martin, 91 F.3d 389, 393 (3d. Cir. 1996) (stating
that “[t]o minimize litigation and expedite the administration of a bankruptcy estate,
compromises are favored in bankruptcy” and citing the criteria set forth above in determination
of reasonableness of particular settlements) (internal quotation marks and citation omitted); In re
Penn Cent. Transp. Co., 596 F.2d at 1114 (relevant factor is whether “[t]he settlement is well
within the range of reasonably likely litigation possibilities”) (internal quotation marks and citation omitted).
23. Basic to the process of evaluating proposed settlements, then, is “the need to compare the terms of the compromise with the likely rewards of litigation.” TMT Trailer Ferry,
Inc., 390 U.S. at 425. However, “[t]he court need not decide the numerous questions of law or fact raised by litigation, but rather should canvas the issues to determine whether the settlement falls above the lowest point in the range of reasonableness.” In re Capmark Fin. Grp. Inc., 438
B.R. 471, 515 (Bankr. D. Del. 2010); see also In re World Health Alt., Inc., 344 B.R. 291, 296
(Bankr. D. Del. 2006) (“[T]he court does not have to be convinced that the settlement is the best possible compromise. Rather, the court must conclude that the settlement is within the reasonable range of litigation possibilities.”) (internal citations and quotation marks omitted).
24. The Trustee submits that the proposed compromise embodied in the Settlement
Agreement is fair and reasonable and should be approved. The Settlement Agreement is the product of extended and intensive arm’s-length negotiations that resolve complex and difficult
7 Case 13-13087-KG Doc 2293-1 Filed 03/12/19 Page 32 of 36
disputes with the end result that money will remain in the Trust to satisfy the claims of unsecured creditors. As a result of the Settlement Agreement and the other actions taken by the Trustee and the predecessor official committee in these Chapter 11 Cases, unsecured creditors stand to receive meaningful distributions on allowed claims. By contrast, initial projections by the
Debtors at the start of the Chapter 11 Cases were to pay nothing to such creditors. Moreover, resolving this litigation, the outcome of which is uncertain, allows the Trustee to dedicate additional resources to resolving substantially more lucrative outstanding litigation claims.
Accordingly, this resolution may facilitate an increase in, and expedition of, distributions to all unsecured creditors.
NO PRIOR REQUEST
25. No previous request for the relief sought by this Motion has been made to this or any other Court.
NOTICE
26. Notice of this Motion will be given to: (a) the United States Trustee for the
District of Delaware; and (b) all parties that have requested or that are required to receive notice pursuant to Bankruptcy Rule 2002. The Trustee submits that, under the circumstances, no other or further notice is required.
[remainder of page left intentionally blank]
8 Case 13-13087-KG Doc 2293-1 Filed 03/12/19 Page 33 of 36
WHEREFORE, the Trustee respectfully requests the entry of an order, substantially in
the form attached hereto as Exhibit A, (i) approving the Settlement Agreement, (ii) authorizing
the Trustee to redact information reflecting or referring to the Settlement Agreement, the terms of the Settlement Agreement or the settlement amount from future reports and other filings with the Court, including but not limited to future post confirmation quarterly reports, and (iii) granting such other relief as is just and proper.
Dated: February __, 2019 SAUL EWING ARSTEIN & LEHR LLP
Mark Minuti (DE Bar No. 2659) 1201 North Market St., Suite 2300 Wilmington, Delaware 19801 Telephone: (302) 421-6840 Facsimile: (302) 421-5873
- and -
BROWN RUDNICK LLP William R. Baldiga (admitted pro hac vice) Seven Times Square New York, New York 10036 Telephone: (212) 209-4800 Facsimile: (212) 209-4801
Sunni P. Beville (admitted pro hac vice) One Financial Center Boston, Massachusetts 02111 Telephone: (617) 856-8200 Facsimile: (617) 856-8201
Mark S. Baldwin (admitted pro hac vice) Anthony J. Boccamazzo (admitted pro hac vice) 185 Asylum Street Hartford, Connecticut 06103 Telephone: (860) 509-6500 Facsimile: (860) 509-6501
Co-Counsel to Emerald Capital Advisors Corp. as Trustee for the FAH Liquidating Trust
9 Case 13-13087-KG Doc 2293-1 Filed 03/12/19 Page 34 of 36
EXHIBIT A
PROPOSED ORDER Case 13-13087-KG Doc 2293-1 Filed 03/12/19 Page 35 of 36
IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE
Chapter 11 In re:
Case No. 13-13087 (KG) FAH LIQUIDATING CORP. (f/k/a FISKER
AUTOMOTIVE HOLDINGS, INC.), , et al. Jointly Administered
Debtors.1
ORDER PURSUANT TO RULE 9019 OF THE FEDERAL RULES OF BANKRUPTCY PROCEDURE APPROVING THE SETTLEMENT OF THE CLAIMS AGAINST KARMA AUTOMOTIVE LLC AND WANXIANG CLEAN ENERGY USA LLC
Upon the motion (the “Motion”)2 of the Trustee for entry of an order, pursuant to Rule
9019 of the Federal Rules of Bankruptcy Procedure and section 105(a) of the Bankruptcy Code, approving the Settlement Agreement between the Parties; and the Court having jurisdiction to consider the Motion and the relief requested therein; and due and sufficient notice of the Motion having been given; and upon the record herein and after due deliberation and sufficient cause appearing therefor;
IT IS HEREBY ORDERED THAT:
1. The Motion is GRANTED as set forth herein.
2. The Settlement Agreement is hereby APPROVED.
1 The Debtors, together with the last four digits of each Debtor’s federal tax identification number, are FAH Liquidating Corp. (f/k/a Fisker Automotive Holdings, Inc.) (9678) and FA Liquidating Corp. (f/k/a Fisker Automotive, Inc.) (9075). The service address for the Debtors is 3080 Airway Avenue, Costa Mesa, California 92626. 2 Any and all capitalized terms not defined herein shall have the meaning ascribed to them in the Motion. Case 13-13087-KG Doc 2293-1 Filed 03/12/19 Page 36 of 36
3. The Trustee is authorized to redact information reflecting or referring to the
Settlement Agreement, the terms of the Settlement Agreement or the settlement amount from future reports and other filings with the Court, including but not limited to future post confirmation quarterly reports filed in these cases.
4. This Court shall retain jurisdiction over any and all matters arising from the interpretation or implementation of this 9019 Order.
Dated: , 2019
Honorable Kevin Gross United States Bankruptcy Judge
2